Related papers: Equilibrium Pricing in an Order Book Environment: …
In this chapter, an input-output economic model with multiple interactive economic systems is considered. The model captures the multi-dimensional nature of the economic sectors or industries in each economic system, the interdependencies…
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…
The Ricardian model of world trade based on comparative advantage is not sufficient to justify equal trade relations.The existing model of trade relations does not explain the distribution of income among trading countries. This paper…
This paper proposes an agent-based model that combines both spot and balancing electricity markets. From this model, we develop a multi-agent simulation to study the integration of the consumers' flexibility into the system. Our study…
A prototype model of stock market is introduced and studied numerically. In this self-organized system, we consider only the interaction among traders without external influences. Agents trade according to their own strategy, to accumulate…
We introduce a prototype model in an attempt to capture some aspects of market dynamics simulating a trading mechanism. The model description starts with a discrete-space, continuous-time Markov process describing arrival and movement of…
We study a microscopic limit order book model, in which the order dynamics depend on the current best bid and ask price and the current volume density functions, simultaneously, and derive its macroscopic high-frequency dynamics. As opposed…
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…
This work's purpose is to understand the dynamics of limit order books in order-driven markets. We try to illustrate a dynamical trading mechanism attached to the microstructure of limit order markets. We capture the iterative nature of…
The problem of arriving at a principled method of pricing goods and services was very satisfactorily solved for conventional goods; however, this solution is not applicable to digital goods. This paper studies pricing of a special class of…
How and why stock prices move is a centuries-old question still not answered conclusively. More recently, attention shifted to higher frequencies, where trades are processed piecewise across different timescales. Here we reveal that price…
We develop a behavioral model for liquidity and volatility based on empirical regularities in trading order flow in the London Stock Exchange. This can be viewed as a very simple agent based model in which all components of the model are…
This paper studies the equilibrium pricing of asset shares in the presence of dynamic private information. The market consists of a risk-neutral informed agent who observes the firm value, noise traders, and competitive market makers who…
The rise of the machine learning (ML) model economy has intertwined markets for training datasets and pre-trained models. However, most pricing approaches still separate data and model transactions or rely on broker-centric pipelines that…
We present a measurement of price impact in order-driven markets that does not require averages across executions or scenarios. Given the order book data associated with one single execution of a sell metaorder, we measure its contribution…
We propose a simple statistical-physics-inspired model for the effect of intrinsic fluctuations on supply and demand in markets. The model consists of agents that trade in two types of goods of which the total number is separately…
Equilibrium pricing has been proven to underlie the rational Insured expectancy of premia additivity for composition of policies fully covering independent risks.
Under the same assumptions made by Mas-Colell et al. (1995), I develop a short, simple, and complete proof of existence of equilibrium prices based on excess demand functions. The result is obtained by applying the Brouwer fixed point…
The distribution of liquidity within the limit order book is essential for the impact of market orders on the stock price and the emergence of price shocks. Limit orders are characterized by stylized facts: The number of inserted limit…
Non-equilibrium phenomena occur not only in physical world, but also in finance. In this work, stochastic relaxational dynamics (together with path integrals) is applied to option pricing theory. A recently proposed model (by Ilinski et…