Related papers: A limit order book model for latency arbitrage
A small investor provides liquidity at the best bid and ask prices of a limit order market. For small spreads and frequent orders of other market participants, we explicitly determine the investor's optimal policy and welfare. In doing so,…
Addressing the ongoing examination of high-frequency trading practices in financial markets, we report the results of an extensive empirical study estimating the maximum possible profitability of the most aggressive such practices, and…
Trading large volumes of a financial asset in order driven markets requires the use of algorithmic execution dividing the volume in many transactions in order to minimize costs due to market impact. A proper design of an optimal execution…
As algorithmic trading and electronic markets continue to transform the landscape of financial markets, detecting and deterring rogue agents to maintain a fair and efficient marketplace is crucial. The explosion of large datasets and the…
We explore a nuance to 'no arbitrage' in relation to 'information efficiency': acting immediately on an arbitrage is sometimes suboptimal; in such cases optimised trading can suppress the anticipation of predictable risk-outcomes, thereby…
A range of empirical puzzles in finance has been explained as a consequence of traders being averse to ambiguity. Ambiguity averse traders can behave in financial portfolio problems in ways that cannot be rationalized as maximizing…
We exploit cutting-edge deep learning methodologies to explore the predictability of high-frequency Limit Order Book mid-price changes for a heterogeneous set of stocks traded on the NASDAQ exchange. In so doing, we release `LOBFrame', an…
This paper studies inter-trade durations in the NASDAQ limit order market and finds that inter-trade durations in ultra-high frequency have two modes. One mode is to the order of approximately 10^{-4} seconds, and the other is to the order…
In the present work we introduce a novel multi-agent model with the aim to reproduce the dynamics of a double auction market at microscopic time scale through a faithful simulation of the matching mechanics in the limit order book. The…
This paper is concerned with a pairs trading rule. The idea is to monitor two historically correlated securities. When divergence is underway, i.e., one stock moves up while the other moves down, a pairs trade is entered which consists of a…
Order book dynamics play an important role in both execution time and price formation of orders in an exchange market. In this study, we aim to model the limit order arrival rates in the vicinity of the best bid and the best ask price…
We study optimal trade execution strategies in financial markets with discrete order flow. The agent has a finite liquidation horizon and must minimize price impact given a random number of incoming trade counterparties. Assuming that the…
We design a prediction market to recover a complete and fully general probability distribution over a random variable. Traders buy and sell interval securities that pay \$1 if the outcome falls into an interval and \$0 otherwise. Our market…
This study explores the design of an efficient rebate policy in auction markets, focusing on a continuous-time setting with competition among market participants. In this model, a stock exchange collects transaction fees from auction…
We consider the problem of dynamic pricing with limited supply. A seller has $k$ identical items for sale and is facing $n$ potential buyers ("agents") that are arriving sequentially. Each agent is interested in buying one item. Each…
We study arbitrage opportunities, market viability and utility maximization in market models with an insider. Assuming that an economic agent possesses from the beginning an additional information in the form of a random variable G, which…
Whether you trade futures for yourself or a hedge fund, your strategy is counted. Long and short position limits make the number of unique strategies finite. Formulas of the numbers of strategies, transactions, do nothing actions are…
Bilateral trade models the task of intermediating between two strategic agents, a seller and a buyer, who wish to trade a good. We study this problem from the perspective of a profit-maximizing broker within an online learning framework,…
We study an online market-making problem in which a learner sequentially posts bid and ask prices for a single asset while interacting with traders holding private valuations. Unlike existing online learning formulations that assume fully…
The aim of this short note is to establish a limit theorem for the optimal trading strategies in the setup of the utility maximization problem with proportional transaction costs. This limit theorem resolves the open question from [4]. The…