Related papers: Measuring market liquidity: An introductory survey
We study a continuous-time version of the intermediation model of Grossman and Miller (1988). To wit, we solve for the competitive equilibrium prices at which liquidity takers' demands are absorbed by dealers with quadratic inventory costs,…
Risk measures for multivariate financial positions are studied in a utility-based framework. Under a certain incomplete preference relation, shortfall and divergence risk measures are defined as the optimal values of specific set…
The continuous time model of dynamic asset trading is the central model of modern finance. Because trading cannot in fact take place at every moment of time, it would seem desirable to show that the continuous time model can be viewed as…
Biondi et al. (2012) develop an analytical model to examine the emergent dynamic properties of share market price formation over time, capable to capture important stylized facts. These latter properties prove to be sensitive to regulatory…
A dynamical model is introduced for the formation of a bullish or bearish trends driving an asset price in a given market. Initially, each agent decides to buy or sell according to its personal opinion, which results from the combination of…
Machine learning (especially reinforcement learning) methods for trading are increasingly reliant on simulation for agent training and testing. Furthermore, simulation is important for validation of hand-coded trading strategies and for…
To the best of our knowledge, this paper proposes for the first time a design of a continuous local flexibility market that explicitly considers network constraints. Continuous markets are expected to be the most appropriate design option…
We investigate entropy as a financial risk measure. Entropy explains the equity premium of securities and portfolios in a simpler way and, at the same time, with higher explanatory power than the beta parameter of the capital asset pricing…
Decisions taken in our everyday lives are based on a wide variety of information so it is generally very difficult to assess what are the strategies that guide us. Stock market therefore provides a rich environment to study how people take…
Market making refers to a form of trading in financial markets characterized by passive orders which add liquidity to limit order books. Market makers are important for the proper functioning of financial markets worldwide. Given the…
Automated market makers (AMM) have grown to obtain significant market share within the cryptocurrency ecosystem, resulting in a proliferation of new products pursuing exotic strategies for horizontal differentiation. Yet, their theoretical…
We study the range of prices at which a rational agent should contemplate transacting a financial contract outside a given securities market. Trading is subject to nonproportional transaction costs and portfolio constraints and full…
We consider the consumption-based asset pricing model, derive a new modified basic pricing equation, and present its successive approximations using the Taylor series expansions of the investor's utility during the averaging time interval.…
We analyze the stability properties of equilibrium solutions and periodicity of orbits in a two-dimensional dynamical system whose orbits mimic the evolution of the price of an asset and the excess demand for that asset. The construction of…
With the emergence of decentralized finance, new trading mechanisms called Automated Market Makers have appeared. The most popular Automated Market Makers are Constant Function Market Makers. They have been studied both theoretically and…
Price perception by consumers represents a challenge to the ability of a business to correctly and profitably price and sell their products or services in a given market and any new target market. Complicating the perception of prices is…
Starting from the global financial crisis to the more recent disruptions brought about by geopolitical tensions and public health crises, the volatility of risk in financial markets has increased significantly. This underscores the…
I introduce a stability notion, dynamic stability, for two-sided dynamic matching markets where (i) matching opportunities arrive over time, (ii) matching is one-to-one, and (iii) matching is irreversible. The definition addresses two…
Using recent advances in the econometrics literature, we disentangle from high frequency observations on the transaction prices of a large sample of NYSE stocks a fundamental component and a microstructure noise component. We then relate…
In this model study of the commodity market, we present some evidence of competition of commodities for the status of money in the regime of parameters, where emergence of money is possible. The competition reveals itself as a rivalry of a…