Related papers: Simulating the Synchronizing Behavior of High-Freq…
We study a an optimal high frequency trading problem within a market microstructure model designed to be a good compromise between accuracy and tractability. The stock price is driven by a Markov Renewal Process (MRP), while market orders…
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…
The Hawkes model is suitable for describing self and mutually exciting random events. In addition, the exponential decay in the Hawkes process allows us to calculate the moment properties in the model. However, due to the complexity of the…
An agent-based model with interacting low frequency liquidity takers inter-mediated by high-frequency liquidity providers acting collectively as market makers can be used to provide realistic simulated price impact curves. This is possible…
In this short note, we will show how to optimize the portfolio of a large trader whose hedging strategy affects the price of his assets.
This work focuses on a self-exciting point process defined by a Hawkes-like intensity and a switching mechanism based on a hidden Markov chain. Previous works in such a setting assume constant intensities between consecutive events. We…
By incorporating market impact and asymmetric sensitivity into the evolutionary minority game, we study the coevolutionary dynamics of stock prices and investment strategies in financial markets. Both the stock price movement and the…
In recent years, a wide range of investment models have been created using artificial intelligence. Automatic trading by artificial intelligence can expand the range of trading methods, such as by conferring the ability to operate 24 hours…
This paper reviews some of the phenomenological models which have been introduced to incorporate the scaling properties of financial data. It also illustrates a microscopic model, based on heterogeneous interacting agents, which provides a…
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…
We examine the dynamics of informational efficiency in a market with asymmetrically informed, boundedly rational traders who adaptively learn optimal strategies using simple multiarmed bandit (MAB) algorithms. The strategies available to…
Equity options are known to be notoriously difficult to price accurately, and even with the development of established mathematical models there are many assumptions that must be made about the underlying processes driving market movements.…
Symmetries are ubiquitous in network systems and have profound impacts on the observable dynamics. At the most fundamental level, many synchronization patterns are induced by underlying network symmetry, and a high degree of symmetry is…
A statistical physics model for the time evolutions of stock portfolios is proposed. In this model the time series of price changes are coded into the sequences of up and down spins. The Hamiltonian of the system is introduced and is…
We assume the market price to diffuse in a hierarchical comb of barriers, the heights of which represent the importance of new information entering the market. We find fat tails with the desired exponent for the price change distribution,…
We argue that an important contributing factor into market inefficiency is the lack of a robust mechanism for the stock price to rise if a company has good earnings, e.g., via buybacks/dividends. Instead, the stock price is prone to…
A coordinated trading process is proposed as a design for an electricity market with significant uncertainty, perhaps from renewables. In this process, groups of agents propose to the system operator (SO) a contingent buy and sell trade…
Tie-line scheduling in multi-area power systems in the US largely proceeds through a market-based mechanism called Coordinated Transaction Scheduling (CTS). We analyze this market mechanism through a game-theoretic lens. Our analysis…
Stochastic clocks represent a class of time change methods for incorporating trading activity into continuous-time financial models, with the ability to deal with typical asymmetrical and tail risks in financial returns. In this paper we…
Summarized by the efficient market hypothesis, the idea that stock prices fully reflect all available information is always confronted with the behavior of real-world markets. While there is plenty of evidence indicating and quantifying the…