Related papers: A Functional Limit Theorem for Limit Order Books w…
In this paper, we consider an infinite horizon, continuous-review, stochastic inventory system in which cumulative customers' demand is price-dependent and is modeled as a Brownian motion. Excess demand is backlogged. The revenue is earned…
We consider the problem of dynamic pricing with limited supply. A seller has $k$ identical items for sale and is facing $n$ potential buyers ("agents") that are arriving sequentially. Each agent is interested in buying one item. Each…
This paper poses a few fundamental questions regarding the attributes of the volume profile of a Limit Order Books stochastic structure by taking into consideration aspects of intraday and interday statistical features, the impact of…
Through the analysis of a dataset of ultra high frequency order book updates, we introduce a model which accommodates the empirical properties of the full order book together with the stylized facts of lower frequency financial data. To do…
We study the analytical properties of a one-side order book model in which the flows of limit and market orders are Poisson processes and the distribution of lifetimes of cancelled orders is exponential. Although simplistic, the model…
We propose a modeling framework for the dynamics of a reduced form order book in event time and based on event sizes. Our framework for the order book is influenced by [9], but compared to [9] we allow the best bid ask spread to be larger…
A novel high-frequency market-making approach in discrete time is proposed that admits closed-form solutions. By taking advantage of demand functions that are linear in the quoted bid and ask spreads with random coefficients, we model the…
We examine the correlation of the limit price with the order book, when a limit order comes. We analyzed the Rebuild Order Book of Stock Exchange Electronic Trading Service, which is the centralized order book market of London Stock…
In the domain of the so called Econophysics some attempts already have been made for applying the theory of Thermodynamics and Statistical Mechanics to economics and financial markets. In this paper a similar approach is made from a…
The existence of a (partial) market equilibrium price is proved in a complete, continuous time finite-agent market setting. The economic agents act as price takers in a fully competitive setting and maximize exponential utility from…
This paper considers a Markovian model of a limit order book where time-dependent rates are allowed. With the objective of understanding the mechanisms through which a microscopic model of an orderbook can converge to more general diffusion…
Although behavioral economics has demonstrated that there are many situations where rational choice is a poor empirical model, it has so far failed to provide quantitative models of economic problems such as price formation. We make a step…
We present an extended version of the recently proposed "LLOB" model for the dynamics of latent liquidity in financial markets. By allowing for finite cancellation and deposition rates within a continuous reaction-diffusion setup, we…
In this paper we investigate a dynamic pricing model for constant demand elasticity where customers have a probability distribution on the number of items they order. This is a generalization from standard models which restrict customers to…
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 consider the problem of designing an expected-revenue maximizing mechanism for allocating multiple non-perishable goods of $k$ varieties to flexible consumers over $T$ time steps. In our model, a random number of goods of each variety…
Proceeding from the concept of rational expectations, a new dynamic model of supply and demand in a single market with one supplier, one buyer, and one kind of commodity is developed. Unlike the cob-web dynamic theories with adaptive…
There is a widespread recent interest in using ideas from statistical physics to model certain types of problems in economics and finance. The main idea is to derive the macroscopic behavior of the market from the random local interactions…
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…
We investigate activities that have different periods of duration. We define the profit intensity as a measure of this economic category. The profit intensity in a repeated trading has a unique property of attaining its maximum at a fixed…