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We develop a new market-making model, from the ground up, which is tailored towards high-frequency trading under a limit order book (LOB), based on the well-known classification of order types in market microstructure. Our flexible…
The efficient market hypothesis (EMH) famously stated that prices fully reflect the information available to traders. This critically depends on the transfer of information into prices through trading strategies. Traders optimise their…
We show that financial correlations exhibit a non-trivial dynamic behavior. We introduce a simple phenomenological model of a multi-asset financial market, which takes into account the impact of portfolio investment on price dynamics. This…
We study an optimal extraction problem where the agent's actions in the spot market exert an additive proportional negative impact on the commodity price. The commodity price dynamics, prior to any activity by the agent, are evolved by a…
I present an overview of some recent advancements on the empirical analysis and theoretical modeling of the process of price formation in financial markets as the result of the arrival of orders in a limit order book exchange. After…
This paper develops a strategic model of trade between two regions in which, depending on the relation among output, financial resources and transportation costs, the adjustment of prices towards an equilibrium is studied. We derive…
The goal of an auction is to determine commodity prices such that all participants are perfectly happy. Such a solution is called a competitive equilibrium and does not exist in general. For this reason we are interested in solutions which…
We study an agent-based stock market model with heterogeneous agents and friction. Our model is based on that of Foellmer-Schweizer(1993): The process of a stock price in a discrete-time framework is determined by temporary equilibria via…
In this paper we present a continuous time dynamical model of heterogeneous agents interacting in a financial market where transactions are cleared by a market maker. The market is composed of fundamentalist, trend following and contrarian…
Large variations in stock prices happen with sufficient frequency to raise doubts about existing models, which all fail to account for non-Gaussian statistics. We construct simple models of a stock market, and argue that the large…
In this article we revisit the classic problem of tatonnement in price formation from a microstructure point of view, reviewing a recent body of theoretical and empirical work explaining how fluctuations in supply and demand are slowly…
Financial firms and institutional investors are routinely evaluated based on their performance relative to their peers. These relative performance concerns significantly influence risk-taking behavior and market dynamics. While the…
We explore nature of price formation in financial markets and develop a theory of bid and ask price dynamics in which the two prices form due to quantum-chaotic interaction between buy and sell orders. In this model bid and ask prices are…
This paper considers utility indifference valuation of derivatives under model uncertainty and trading constraints, where the utility is formulated as an additive stochastic differential utility of both intertemporal consumption and…
A platform charges a producer for disclosing quality evidence to consumers before trade. It aims to maximize its revenue guarantee across potentially multiple equilibria which arise from the interdependence of producer purchase decisions…
In this paper, we address one of the main puzzles in finance observed in the stock market by proponents of behavioral finance: the stock predictability puzzle. We offer a statistical model within the context of rational finance which can be…
The Bohmian quantum approach is implemented to analyze the financial markets. In this approach, there is a wave function that leads to a quantum potential. This potential can explain the relevance and entanglements of the agent's behaviors…
Financial markets for Liquified Natural Gas (LNG) are an important and rapidly-growing segment of commodities markets. Like other commodities markets, there is an inherent spatial structure to LNG markets, with different price dynamics for…
The increased market penetration of renewable energy sources and the rapid development of electric battery storage technologies yield a potential for reducing electricity price volatility while maintaining stability of the power grid. This…