Related papers: Equilibrium Pricing in an Order Book Environment: …
We propose a microstructural modeling framework for studying optimal market making policies in a FIFO (first in first out) limit order book (LOB). In this context, the limit orders, market orders, and cancel orders arrivals in the LOB are…
Traders constantly consider the price impact associated with changing their positions. This paper seeks to understand how price impact emerges from the quoting strategies of market makers. To this end, market making is modeled as a dynamic…
We develop a theory for the market impact of large trading orders, which we call metaorders because they are typically split into small pieces and executed incrementally. Market impact is empirically observed to be a concave function of…
A consistency criterion for price impact functions in limit order markets is proposed that prohibits chain arbitrage exploitation. Both the bid-ask spread and the feedback of sequential market orders of the same kind onto both sides of the…
Limit order books (LOBs) match buyers and sellers in more than half of the world's financial markets. This survey highlights the insights that have emerged from the wealth of empirical and theoretical studies of LOBs. We examine the…
Interference between treated and untreated units is a source of bias in marketplace experiments. In this paper, we specifically consider pricing interventions, in which a platform seeks to adjust base pricing levels at the marketplace level…
Considering that a trader or a trading algorithm interacting with markets during continuous auctions can be modeled by an iterating procedure adjusting the price at which he posts orders at a given rhythm, this paper proposes a procedure…
We have studied here the self-organising features of the dynamics of a model market, where the agents `trade' for a single commodity with their money. The model market consists of fixed numbers of economic agents, money supply and…
Higher order interactions can lead to new equilibrium states and bifurcations in systems of coupled oscillators described by the Kuramoto model. However, even in the simplest case of 3-body interactions there are more than one possible…
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…
We suggest an original physical approach to describe the mechanism of market pricing. The core of our approach is to consider pricing at different time scales separately, using independent equations of motion. Such an approach leads to a…
Statistical and dynamical characters of stock markets have been extensively studied, which now is providing the firm basis for econophysics and its application as ``stylized facts''. However, most of those studies are for markets under the…
A fundamental question about a market is under what conditions, and then how rapidly, does price signaling cause price equilibration. Qualitatively, this ought to depend on how well-connected the market is. We address this question…
We build a profitable electronic trading agent with Reinforcement Learning that places buy and sell orders in the stock market. An environment model is built only with historical observational data, and the RL agent learns the trading…
In this paper we introduce a completely continuous and time-variate model of the evolution of market limit orders based on the existence, uniqueness, and regularity of the solutions to a type of stochastic partial differential equations…
Autonomous and learning agents increasingly participate in markets - setting prices, placing bids, ordering inventory. Such agents are not just aiming to optimize in an uncertain environment; they are making decisions in a game-theoretical…
We propose a term structure power price model that, in contrast to widely accepted no-arbitrage based approaches, accounts for the non-storable nature of power. It belongs to a class of equilibrium game theoretic models with players divided…
This paper proposes a parametric approach for stochastic modeling of limit order markets. The models are obtained by augmenting classical perfectly liquid market models by few additional risk factors that describe liquidity properties of…
We study a class of heterogeneous agent-based models which are based on a basic set of principles, and the most fundamental operations of an economic system: trade and product transformations. A basic guiding principle is scale invariance,…
Probabilistic intraday electricity price forecasting is becoming increasingly important for short-term power-system operation. With increasing renewable generation, demand-side flexibility, and storage assets, market participants need to…