Related papers: High Frequency Market Making
Market making is a fundamental trading problem in which an agent provides liquidity by continually offering to buy and sell a security. The problem is challenging due to inventory risk, the risk of accumulating an unfavourable position and…
We study optimal liquidation strategies under partial information for a single asset within a finite time horizon. We propose a model tailored for high-frequency trading, capturing price formation driven solely by order flow through…
This paper studies optimal market making for large-tick assets in the presence of latency. We consider a random walk model for the asset price, and formulate the market maker's optimization problem using Markov Decision Processes (MDP). We…
This paper deals with a stochastic order-driven market model with waiting costs, for order books with heterogenous traders. Offer and demand of liquidity drives price formation and traders anticipate future evolutions of the order book. 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…
We study the optimal mechanism design problem faced by a market intermediary who makes revenue by connecting buyers and sellers. We first show that the optimal intermediation protocol has substantial structure: it is the solution to an…
\noindent We address the issue of market making on electronic markets when taking into account the clustering and long memory properties of market order flows. We consider a market model with one market maker and order flows driven by…
We present a novel approach to describing the microstructure of high frequency trading using two key elements. First we introduce a new notion of informed trader which we starkly contrast to current informed trader models. We describe the…
In this paper, we employ the Heston stochastic volatility model to describe the stock's volatility and apply the model to derive and analyze the optimal trading strategies for dealers in a security market. We also extend our study to option…
We investigate a market with a normal-speed informed trader (IT) who may employ mixed strategy and multiple anticipatory high-frequency traders (HFTs) who are under different inventory pressures, in a three-period Kyle's model. The pure-…
Following the recent literature on make take fees policies, we consider an exchange wishing to set a suitable contract with several market makers in order to improve trading quality on its platform. To do so, we use a principal-agent…
We model the behavior of three agent classes acting dynamically in a limit order book of a financial asset. Namely, we consider market makers (MM), high-frequency trading (HFT) firms, and institutional brokers (IB). Given a prior dynamic of…
We consider a market where a finite number of players trade an asset whose supply is a stochastic process. The price formation problem consists of finding a price process that ensures that when agents act optimally to minimize their trading…
We consider a simple model for the evolution of a limit order book in which limit orders of unit size arrive according to independent Poisson processes. The frequencies of buy limit orders below a given price level, respectively sell limit…
As the FX markets continue to evolve, many institutions have started offering passive access to their internal liquidity pools. Market makers act as principal and have the opportunity to fill those orders as part of their risk management,…
To execute a trade, participants in electronic equity markets may choose to submit limit orders or market orders across various exchanges where a stock is traded. This decision is influenced by the characteristics of the order flow and…
We consider a stochastic game between three types of players: an inside trader, noise traders and a market maker. In a similar fashion to Kyle's model, we assume that the insider first chooses the size of her market-order and then the…
Market participants regularly send bid and ask quotes to exchange-operated limit order books. This creates an optimization challenge where their potential profit is determined by their quoted price and how often their orders are…
Electricity market operators worldwide use mixed-integer linear programming to solve the allocation problem in wholesale electricity markets. Prices are typically determined based on the duals of relaxed versions of this optimization…