Related papers: Permanent market impact can be nonlinear
Mixed-effect models are flexible tools for researchers in a myriad of fields, but that flexibility comes at the cost of complexity and if users are not careful in how their model is specified, they could be making faulty inferences from…
As demonstrated during the recent financial crisis, regulators require additional analytical tools to assess systemic risk in the financial sector. This paper describes one such tool; namely a novel market modeling and analysis capability.…
We develop a general framework for incorporating distributional preferences in market design. We identify the structural properties of these preferences that guarantee the path independence of choice rules. In decentralized settings, a…
Two-sided matching markets have long existed to pair agents in the absence of regulated exchanges. A common example is school choice, where a matching mechanism uses student and school preferences to assign students to schools. In such…
DeGroot-style opinion formation presumes a continuous interaction among agents of a social network. Hence, it cannot handle agents external to the social network that interact only temporarily with the permanent ones. Many real-world…
Using data from a live trading experiment on the Binance Bitcoin perpetual, we examine the effects of (i) basic order book mechanics and (ii) the persistence of price changes from immediate to short timescales, revealing the interplay…
Factor structures or interactive effects are convenient devices to incorporate latent variables in panel data models. We consider fixed effect estimation of nonlinear panel single-index models with factor structures in the unobservables,…
Bielecki and Rutkowski (2014) introduced and studied a generic nonlinear market model, which includes several risky assets, multiple funding accounts and margin accounts. In this paper, we examine the pricing and hedging of contract both…
Recent literature on computational notions of fairness has been broadly divided into two distinct camps, supporting interventions that address either individual-based or group-based fairness. Rather than privilege a single definition, we…
In this paper, we propose a minimal model beyond geometric Brownian motion that aims to describe price actions with market inefficiency. From simple financial theory considerations, we arrive at a simple two-variable hidden Markovian time…
We consider a competitive market with risk-averse participants. We assume that agents' risks are measured by coherent risk measures introduced by Artzner et al. (1999). Fundamental theorems of welfare economics have long established the…
We study the problem of the execution of a moderate size order in an illiquid market within the framework of a solvable Markovian model. We suppose that in order to avoid impact costs, a trader decides to execute her order through a unique…
We develop a new stock market index that captures the chaos existing in the market by measuring the mutual changes of asset prices. This new index relies on a tensor-based embedding of the stock market information, which in turn frees it…
We extend simple opinion models to obtain stable but continuously evolving communities. Our scope is to meet a challenge raised by sociologists of generating "structures that last from non lasting entities". We achieve this by introducing…
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…
In this paper, we present an alternative perspective on the mean-field LIBOR market model introduced by Desmettre et al. in arXiv:2109.10779. Our novel approach embeds the mean-field model in a classical setup, but retains the crucial…
Market Mill is a complex dependence pattern leading to nonlinear correlations and predictability in intraday dynamics of stock prices. The present paper puts together previous efforts to build a dynamical model reflecting the market mill…
Everlasting options, a relatively new class of perpetual financial derivatives, have emerged to tackle the challenges of rolling contracts and liquidity fragmentation in decentralized finance markets. This paper offers an in-depth analysis…
We utilize a chartist-fundamentalist model to examine the limits of informationally efficient stock markets. In our model, chartists are permanently active in the stock market, while fundamentalists trade only when their…
This article considers the pricing and hedging of a call option when liquidity matters, that is, either for a large nominal or for an illiquid underlying asset. In practice, as opposed to the classical assumptions of a price-taking agent in…