Related papers: Measuring market liquidity: An introductory survey
We demonstrate market inefficiency in cryptoasset markets. Our approach examines investments that share a dominant risk factor but differ in their exposure to a secondary risk. We derive equilibrium restrictions that must hold regardless of…
Trading pressure from one asset can move the price of another, a phenomenon referred to as cross impact. Using tick-by-tick data spanning 5 years for 500 assets listed in the United States, we identify the features that make cross-impact…
Market confidence is essential for successful investing. By incorporating multi-market into the evolutionary minority game, we investigate the effects of investor beliefs on the evolution of collective behaviors and asset prices. When there…
We study the problem of determination of asset prices in an incomplete market proposing three different but related scenarios. One scenario uses a market game approach whereas the other two are based on risk sharing or regret minimizing…
This paper conducts an empirical investigation into the effects of Designated Market Makers (DMMs) on key market quality indicators, such as liquidity, bid-ask spreads, and order fulfillment ratios. Through agent-based simulations, this…
Maximum likelihood estimation applied to high-frequency data allows us to quantify intermittency in the fluctu- ations of asset prices. From time records as short as one month these methods permit extraction of a meaningful intermittency…
Flexibility is often claimed as a competitive advantage when proposing new network designs. However, most proposals provide only qualitative arguments for their improved support of flexibility. Quantitative arguments vary a lot among…
In this article we propose a study of market models starting from a set of axioms, as one does in the case of risk measures. We define a market model simply as a mapping from the set of adapted strategies to the set of random variables…
We introduce an agent-based model, in which agents set their prices to maximize profit. At steady state the market self-organizes into three groups: excess producers, consumers and balanced agents, with prices determined by their own…
We consider the problem of calculating risk-neutral implied volatilities of European options without relying on option mid prices but solely on bid and ask prices. We provide an approach, based on the conic finance paradigm, that allows to…
The tokenization of assets deployed to distributed ledger technology is increasingly cited to revolutionize financial services by allowing traditionally illiquid assets to be bought and sold on primary and secondary markets increasing asset…
We present a mathematical formulation of liquidity provision in decentralized exchanges. We focus on constant function market makers of utility indifference type, which include constant product market makers with concentrated liquidity as a…
We study the ex-ante minimization of market inefficiency, defined in terms of minimum deviation of market prices from fundamental values, from a centralized planner's perspective. Prices are pressured from exogenous trading actions of…
We introduce the concept of virtual volatility. This simple but new measure shows how to quantify the uncertainty in the forecast of the drift component of a random walk. The virtual volatility also is a useful tool in understanding the…
We show that financial correlations exhibit a non-trivial dynamic behavior. We introduce a simple phenomenological model of a multi-asset financial market, which takes into account the impact of portfolio investment on price dynamics. This…
Most finance studies are discussed on the basis of several hypotheses, for example, investors rationally optimize their investment strategies. However, the hypotheses themselves are sometimes criticized. Market impacts, where trades of…
Experimental results on market behavior establish a lower stability and efficiency of markets for durable re-tradable assets compared to markets for non-durable, or perishable, goods. In this chapter, we revisit this known but…
We review the nature of some well-known phenomena such as volatility smiles, convexity adjustments and parallel derivative markets. We propose that the market is incomplete and postulate the existence of intrinsic risks in every contingent…
We construct an utility-based dynamic asset pricing model for a limit order market. The price is nonlinear in volume and subject to market impact. We solve an optimal hedging problem under the market impact and derive the dynamics of the…
We introduce a stochastic price model where, together with a random component, a moving average of logarithmic prices contributes to the price formation. Our model is tested against financial datasets, showing an extremely good agreement…