Related papers: Market Making with Model Uncertainty
Risk-neutral pricing dictates that the discounted derivative price is a martingale in a measure equivalent to the economic measure. The residual ambiguity for incomplete markets is here resolved by minimising the entropy of the price…
Ensuring sufficient liquidity is one of the key challenges for designers of prediction markets. Various market making algorithms have been proposed in the literature and deployed in practice, but there has been little effort to evaluate…
This paper studies optimal market making for large-tick assets in the presence of latency. We consider a random walk model for the asset price, and formulate the market maker's optimization problem using Markov Decision Processes (MDP). We…
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…
With the recent technological feasibility of electronic commerce over the Internet, much attention has been given to the design of electronic markets for various types of electronically-tradable goods. Such markets, however, will normally…
We postulates, and then show experimentally, that liquidity deficit is the driving force of the markets. In the first part of the paper a kinematic of liquidity deficit is developed. The calculus-like approach, which is based on…
We develop a risk-neutral spot and equity option market simulator for a single underlying, under which the joint market process is a martingale. We leverage an efficient low-dimensional representation of the market which preserves no static…
Automated Market Makers (AMMs) are a central component of decentralized exchanges, yet their equilibrium foundations and microeconomic mechanisms remain incompletely understood. This paper develops a dynamic equilibrium framework for…
An automated market maker (AMM) provides a method for creating a decentralized exchange on the blockchain. For this purpose, individual investors lend liquidity to the AMM pool in exchange for a stream of fees earned from its operations as…
Prediction markets allow traders to bet on potential future outcomes. These markets exist for weather, political, sports, and economic forecasting. Within this work we consider a decentralized framework for prediction markets using…
We consider a discrete-time model of a financial market where a risky asset is bought and sold with transactions having a transient price impact. It is shown that the corresponding utility maximization problem admits a solution. We manage…
This paper studies matching markets in the presence of middlemen. In our framework, a buyer-seller pair may either trade directly or use the services of a middleman; and a middleman may serve multiple buyer-seller pairs. Direct trade…
Constant function market makers (CFMMs) are a popular decentralized exchange mechanism and have recently been the subject of much research, but major CFMMs give traders no privacy. Prior work proposes randomly splitting and shuffling trades…
A truthful mechanism for a Bayesian single-item auction results with some ex-ante revenue for the seller, and some ex-ante total surplus for the buyers. We study the Pareto frontier of the set of seller-buyers ex-ante utilities, generated…
Recent research in industrial organisation has investigated the essential place that middlemen have in the networks that make up our global economy. In this paper we attempt to understand how such middlemen compete with each other through a…
We introduce a modular framework for market making. It combines cost-function based automated market makers with bandit algorithms. We obtain worst-case profits guarantee's relative to the best in hindsight within a class of natural…
We consider an incomplete multi-asset binomial market model. We prove that for a wide class of contingent claims the extremal multi-step martingale measure is a power of the corresponding single-step extremal martingale measure. This allows…
Sustainable financial markets play an important role in the functioning of human society. Still, the detection and prediction of risk in financial markets remain challenging and draw much attention from the scientific community. Here we…
A public decision-making problem consists of a set of issues, each with multiple possible alternatives, and a set of competing agents, each with a preferred alternative for each issue. We study adaptations of market economies to this…
We consider fundamental questions of arbitrage pricing arising when the uncertainty model is given by a set of possible mutually singular probability measures. With a single probability model, essential equivalence between the absence of…