Related papers: High Frequency Market Making
We consider a finite-horizon market-making problem faced by a dark pool that executes incoming buy and sell orders. The arrival flow of such orders is assumed to be random and, for each transaction, the dark pool earns a per-share…
We analyze an optimal trade execution problem in a financial market with stochastic liquidity. To this end we set up a limit order book model in which both order book depth and resilience evolve randomly in time. Trading is allowed in both…
We develop a stochastic equilibrium model for an electricity market with asymmetric renewable energy forecasts. In our setting, market participants optimize their profits using public information about a conditional expectation of energy…
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…
We propose a stochastic game modelling the strategic interaction between market makers and traders of optimal execution type. For traders, the permanent price impact commonly attributed to them is replaced by quoting strategies implemented…
We characterise the solutions to a continuous-time optimal liquidity provision problem in a market populated by informed and uninformed traders. In our model, the asset price exhibits fads -- these are short-term deviations from the…
This paper builds a model of high-frequency equity returns by separately modeling the dynamics of trade-time returns and trade arrivals. Our main contributions are threefold. First, we characterize the distributional behavior of…
We construct an empirically founded model of a repo trade intermediated by two broker-dealers and prove multiple equilibrium and the existence of equilibrium at the joint profit maximizing volume of trade. We then present a smart contract…
In a fixed time horizon, appropriately executing a large amount of a particular asset -- meaning a considerable portion of the volume traded within this frame -- is challenging. Especially for illiquid or even highly liquid but also highly…
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…
High-frequency trading (HFT) accounts for almost half of equity trading volume, yet it is not identified in public data. We develop novel data-driven measures of HFT activity that separate strategies that supply and demand liquidity. We…
One of the recognized principal issues brought along by the steadfast migration towards power electronic interfaced energy sources is the loss of rotational inertia. In conventional power systems, the inertia of the synchronous machines…
This paper examines the role of algorithmic trading in modern financial markets. Additionally, order types, characteristics, and special features of algorithmic trading are described under the lens provided by the large development of high…
Many empirical studies have discussed market liquidity, which is regarded as a measure of a booming financial market. Further, various indicators for objectively evaluating market liquidity have also been proposed and their merits have been…
We consider the issue of a market maker acting at the same time in the lit and dark pools of an exchange. The exchange wishes to establish a suitable make-take fees policy to attract transactions on its venues. We first solve the stochastic…
We develop from basic economic principles a continuous-time model for a large investor who trades with a finite number of market makers at their utility indifference prices. In this model, the market makers compete with their quotes for the…
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,…
Dealers make money by providing liquidity to clients but face flow uncertainty and thus price risk. They can efficiently skew their prices and wait for clients to mitigate risk (internalization), or trade with other dealers in the open…
Managing a book of options on several underlying involves controlling positions of several thousands of financial assets. It is one of the most challenging financial problems involving both pricing and microstructural modeling. An options…
We find the equilibrium contract that an automated market maker (AMM) offers to their strategic liquidity providers (LPs) in order to maximize the order flow that gets processed by the venue. Our model is formulated as a leader-follower…