Related papers: Measuring market liquidity: An introductory survey
This article is part of a comprehensive research project on liquidity risk in asset management, which can be divided into three dimensions. The first dimension covers liability liquidity risk (or funding liquidity) modeling, the second…
Equity auctions display several distinctive characteristics in contrast to continuous trading. As the auction time approaches, the rate of events accelerates causing a substantial liquidity buildup around the indicative price. This, in…
We develop a new stock market index that captures the chaos existing in the market by measuring the mutual changes of asset prices. This new index relies on a tensor-based embedding of the stock market information, which in turn frees it…
Traditional market makers are losing their importance as automated systems have largely assumed the role of liquidity provision in markets. We update the model of Glosten and Milgrom (1985) to analyze this new world: we add multiple…
This paper develops a dynamic equilibrium model of the insurance market that jointly characterizes insurers' underwriting, investment, recapitalization, and dividend policies under model uncertainty and financial frictions. Competitive…
Financial markets are often modelled as if time were unique and continuous across assets and markets. Financial markets are however asynchronous, order flow is event-driven, and waiting times between events are often random. Many of the…
We introduce a mathematical theory called market connectivity that gives concrete ways to both measure the efficiency of markets and find inefficiencies in large markets. The theory leads to new methods for testing the famous efficient…
The problem of allocating scarce items to individuals is an important practical question in market design. An increasingly popular set of mechanisms for this task uses the concept of market equilibrium: individuals report their preferences,…
In this chapter we review some recent results on the dynamics of price formation in financial markets and its relations with the efficient market hypothesis. Specifically, we present the limit order book mechanism for markets and we…
Classic market design theory is rooted in static models where all participants trade simultaneously. In contrast, modern platform-mediated digital markets are fundamentally dynamic, defined by the asynchronous and stochastic arrival of…
An automated market maker (AMM) provides a method for creating a decentralized exchange on the blockchain. For this purpose, individual investors lend liquidity to the AMM pool in exchange for a stream of fees earned from its operations as…
In financial markets, the order flow, defined as the process assuming value one for buy market orders and minus one for sell market orders, displays a very slowly decaying autocorrelation function. Since orders impact prices, reconciling…
The integration and innovation of finance and technology have gradually transformed the financial system into a complex one. Analyses of the causesd of abnormal fluctuations in the financial market to extract early warning indicators…
We present a new type of game, the Liquidity Game. We draw inspiration from the UK government bond market and apply game theoretic approaches to its analysis. In Liquidity Games, market participants (agents) use non-cooperative games where…
We develop a new framework to detect wash trading in crypto assets through real-time liquidity fluctuation. We propose that short-term price jumps in crypto assets results from wash trading-induced liquidity fluctuation, and construct two…
Realization of uncertainty of prices is captured by volatility, that is the tendency of prices to vary along a period of time. This is generally measured as standard deviation of daily returns. In this paper we propose and investigate the…
With the rise of emerging risks, model uncertainty poses a fundamental challenge in the insurance industry, making robust pricing a first-order question. This paper investigates how insurers' robustness preferences shape competitive…
In order to find a way of measuring the degree of incompleteness of an incomplete financial market, the rank of the vector price process of the traded assets and the dimension of the associated acceptance set are introduced. We show that…
Latent order book models have allowed for significant progress in our understanding of price formation in financial markets. In particular they are able to reproduce a number of stylized facts, such as the square-root impact law. An…
We provide simple models for the utility function (or psychology) of an actor trading a multitude of goods for money. In this framework, money has no intrinsic consumption value, but is required as a medium of exchange. A collection of such…