Related papers: High-frequency market-making with inventory constr…
We introduce the Lyapunov approach to optimal control problems of average risk-sensitive Markov control processes with general risk maps. Motivated by applications in particular to behavioral economics, we consider possibly non-convex risk…
Since they were authorized by the U.S. Security and Exchange Commission in 1998, electronic exchanges have boomed, and by 2010 high frequency trading accounted for over 70% of equity trades in the US. Such markets are thought to increase…
Over the past decade, many dealers have implemented algorithmic models to automatically respond to RFQs and manage flows originating from their electronic platforms. In parallel, building on the foundational work of Ho and Stoll, and later…
We provide an explicit characterization of the optimal market making strategy in a discrete-time Limit Order Book (LOB). In our model, the number of filled orders during each period depends linearly on the distance between the fundamental…
We study the effect of investor inertia on stock price fluctuations with a market microstructure model comprising many small investors who are inactive most of the time. It turns out that semi-Markov processes are tailor made for modelling…
This paper enhances the pricing of derivatives as well as optimal control problems to a level comprising risk. We employ nested risk measures to quantify risk, investigate the limiting behavior of nested risk measures within the classical…
This study explores the prediction of high-frequency price changes using deep learning models. Although state-of-the-art methods perform well, their complexity impedes the understanding of successful predictions. We found that an…
We study hedging and pricing of unattainable contingent claims in a non-Markovian regime-switching financial model. Our financial market consists of a bank account and a risky asset whose dynamics are driven by a Brownian motion and a…
This paper studies a Kyle-Back model with a risk-averse insider possessing exponential utility and a dynamic stochastic signal about the asset's terminal fundamental value. While the existing literature considers either risk-neutral…
Measuring model risk is required by regulators on financial and insurance markets. We separate model risk into parameter estimation risk and model specification risk, and we propose expected shortfall type model risk measures applied to…
The topics treated in this thesis are inherently two-fold. The first part considers the problem of a market maker optimally setting bid/ask quotes over a finite time horizon, to maximize her expected utility. The intensities of the orders…
We study Nash equilibria for inventory-averse high-frequency traders (HFTs), who trade to exploit information about future price changes. For discrete trading rounds, the HFTs' optimal trading strategies and their equilibrium price impact…
Optimal multi-asset trading with Markovian predictors is well understood in the case of quadratic transaction costs, but remains intractable when these costs are $L_1$. We present a mean-field approach that reduces the multi-asset problem…
The paper develops general, discrete, non-probabilistic market models and minmax price bounds leading to price intervals for European options. The approach provides the trajectory based analogue of martingale-like properties as well as a…
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…
We develop a model for pricing, lead-time quotation and delay compensation in a Markovian make-to-order production or service system with strategic customers who exhibit risk aversion. Based on a concave utility function of their net…
Dealers in foreign exchange markets provide bid and ask prices to their clients at which they are happy to buy and sell, respectively. To manage risk, dealers can skew their quotes and hedge in the interbank market. Hedging offers certainty…
A novel high-frequency market-making approach in discrete time is proposed that admits closed-form solutions. By taking advantage of demand functions that are linear in the quoted bid and ask spreads with random coefficients, we model the…
We focus on the problem of market making in high-frequency trading. Market making is a critical function in financial markets that involves providing liquidity by buying and selling assets. However, the increasing complexity of financial…
In this paper we introduce a completely continuous and time-variate model of the evolution of market limit orders based on the existence, uniqueness, and regularity of the solutions to a type of stochastic partial differential equations…