Related papers: Dynamical Trading Mechanism in Limit Order Markets
Trading frictions are stochastic. They are, moreover, in many instances fast-mean reverting. Here, we study how to optimally trade in a market with stochastic price impact and study approximations to the resulting optimal control problem…
We introduce a dynamic mechanism design problem in which the designer wants to offer for sale an item to an agent, and another item to the same agent at some point in the future. The agent's joint distribution of valuations for the two…
It is known that the impact of transactions on stock price (market impact) is a concave function of the size of the order, but there exists little quantitative theory that suggests why this is so. I develop a quantitative theory for the…
This study pioneers the application of the market microstructure framework to an informal financial market. By scraping data from websites and social media about the Cuban informal currency market, we model the dynamics of bid/ask…
We develop a mixed control framework that combines absolutely continuous controls with impulse interventions subject to stochastic execution delays. The model extends current impulse control formulations by allowing (i) the controller to…
The paper deals with the study of labor market dynamics, and aims to characterize its equilibriums and possible trajectories. The theoretical background is the theory of the segmented labor market. The main idea is that this theory is well…
We introduce a simple benchmark model of dynamic matching in networked markets, where agents arrive and depart stochastically and the network of acceptable transactions among agents forms a random graph. We analyze our model from three…
Price dynamics is analyzed in terms of a model which includes the possibility of effective forces due to trend followers or trend adverse strategies. The method is tested on the data of a minority-majority model and indeed it is capable of…
In this paper we present a theoretical framework for determining dynamic ask and bid prices of derivatives using the theory of dynamic coherent acceptability indices in discrete time. We prove a version of the First Fundamental Theorem of…
Using more than 6.7 billions of trades, we explore how the tick-by-tick dynamics of limit order books depends on the aggregate actions of large investment funds on a much larger (quarterly) timescale. In particular, we find that the…
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…
This article provides a simple explanation of the asymptotic concavity of the price impact of a meta-order via the microstructural properties of the market. This explanation is made more precise by a model in which the local relationship…
We study the relationship between price spread, volatility and trading volume. We find that spread forms as a result of interplay between order liquidity and order impact. When trading volume is small adding more liquidity helps improve…
This paper is split in three parts: first we use labelled trade data to exhibit how market participants accept or not transactions via limit orders as a function of liquidity imbalance; then we develop a theoretical stochastic control…
Optimal control models for limit order trading often assume that the underlying asset price is a Brownian motion since they deal with relatively short time scales. The resulting optimal bid and ask limit order prices tend to track the…
This paper presents a continuous-time model of intraday trading, pricing, and liquidity with dynamic TWAP and VWAP benchmarks. The model is solved in closed-form for the competitive equilibrium and also for non-price-taking equilibria. The…
We study the relation between stock price changes and the difference in the number of sell and buy orders. Using a soft spin model, we describe the price impact of order imbalances and find an analogy to the fluctuation-dissipation theorem…
We observe the effects of the three different events that cause spread changes in the order book, namely trades, deletions and placement of limit orders. By looking at the frequencies of the relative amounts of price changing events, we…
In this paper, we introduce a novel reinforcement learning framework for optimal trade execution in a limit order book. We formulate the trade execution problem as a dynamic allocation task whose objective is the optimal placement of market…
This paper explores neural network-based approaches for algorithmic trading in cryptocurrency markets. Our approach combines multi-timeframe trend analysis with high-frequency direction prediction networks, achieving positive risk-adjusted…