Related papers: Dark-Pool Perspective of Optimal Market Making
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…
In order to reduce signalling, traders may resort to limiting access to dark venues and imposing limits on minimum fill sizes they are willing to trade. However, doing this also restricts the liquidity available to the trader since an ever…
We study optimal trade execution strategies in financial markets with discrete order flow. The agent has a finite liquidation horizon and must minimize price impact given a random number of incoming trade counterparties. Assuming that the…
We apply Reinforcement Learning algorithms to solve the classic quantitative finance Market Making problem, in which an agent provides liquidity to the market by placing buy and sell orders while maximizing a utility function. The optimal…
Market makers provide liquidity to other market participants: they propose prices at which they stand ready to buy and sell a wide variety of assets. They face a complex optimization problem with both static and dynamic components. They…
In financial markets, the order flow, defined as the process assuming value one for buy market orders and minus one for sell market orders, displays a very slowly decaying autocorrelation function. Since orders impact prices, reconciling…
This article provides a novel framework to evaluate limit order tactics that highlights expected fill price, adverse price selection cost, and opportunity cost. We formulate the problem of optimal execution of market orders with nonlinear…
We consider a framework for solving optimal liquidation problems in limit order books. In particular, order arrivals are modeled as a point process whose intensity depends on the liquidation price. We set up a stochastic control problem in…
We study the optimal mechanism design problem faced by a market intermediary who makes revenue by connecting buyers and sellers. We first show that the optimal intermediation protocol has substantial structure: it is the solution to an…
We propose a macroscopic market making model \`a la Avellaneda-Stoikov, using continuous processes for orders instead of discrete point processes. The model intends to bridge the gap between market making and optimal execution problems,…
We study an optimal execution problem in the infinite horizon setup. Our financial market is given by the Black-Scholes model with a linear price impact. The main novelty of the current note is that we study the constrained case where the…
We consider a controlled double-ended queue consisting of two classes of customers, labeled sellers and buyers. The sellers and buyers arrive in a trading market according to two independent renewal processes. Whenever there is a seller and…
This paper develops a model for option market making in which the hedging activity of the market maker generates price impact on the underlying asset. The option order flow is modeled by Cox processes, with intensities depending on the…
This paper investigates the impact of dark pools on price discovery (the efficiency of prices on stock exchanges to aggregate information). Assets are traded in either an exchange or a dark pool, with the dark pool offering better prices…
This paper deals with numerical solutions to an impulse control problem arising from optimal portfolio liquidation with bid-ask spread and market price impact penalizing speedy execution trades. The corresponding dynamic programming (DP)…
We study the utility maximization problem for power utility random fields in a semimartingale financial market, with and without intermediate consumption. The notion of an opportunity process is introduced as a reduced form of the value…
We study a problem of optimal investment/consumption over an infinite horizon in a market consisting of a liquid and an illiquid asset. The liquid asset is observed and can be traded continuously, while the illiquid one can only be traded…
We study a single risky financial asset model subject to price impact and transaction cost over an infinite horizon. An investor needs to execute a long position in the asset affecting the price of the asset and possibly incurring in fixed…
Automated market makers are a popular mechanism used on decentralized exchange, through which users trade assets with each other directly and automatically through a liquidity pool and a fixed pricing function. The liquidity provider…
This paper discusses the num\'eraire-based utility maximization problem in markets with proportional transaction costs. In particular, the investor is required to liquidate all her position in stock at the terminal time. We first observe…