Related papers: Optimal market making
One of the problems faced by a firm that sells certain commodities is to determine the number of products that it must supply in order to maximize its profit. In this article, the authors give an answer to this problem of economic interest.…
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…
The existing literature on optimal auctions focuses on optimizing the expected revenue of the seller, and is appropriate for risk-neutral sellers. In this paper, we identify good mechanisms for risk-averse sellers. As is standard in the…
Market making refers to a form of trading in financial markets characterized by passive orders which add liquidity to limit order books. Market makers are important for the proper functioning of financial markets worldwide. Given the…
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 present a new model for prediction markets, in which we use risk measures to model agents and introduce a market maker to describe the trading process. This specific choice on modelling tools brings us mathematical convenience. The…
The global markets provide enterprises with selling opportunities and challenges in stabilizing operational strategies. From the perspective of production management, it is important to improve the profitability of an enterprise by…
We introduce a two-agent problem which is inspired by price asymmetry arising from funding difference. When two parties have different funding rates, the two parties deduce different fair prices for derivative contracts even under the same…
We focus on the problem of market making in high-frequency trading. Market making is a critical function in financial markets that involves providing liquidity by buying and selling assets. However, the increasing complexity of financial…
We consider a two-way trading problem, where investors buy and sell a stock whose price moves within a certain range. Naturally they want to maximize their profit. Investors can perform up to $k$ trades, where each trade must involve the…
In this paper, the optimal pricing strategy in Avellande-Stoikov's for a monopolistic dealer is extended to a general situation where multiple dealers are present in a competitive market. The dealers' trading intensities, their optimal bid…
This article explores the optimisation of trading strategies in Constant Function Market Makers (CFMMs) and centralised exchanges. We develop a model that accounts for the interaction between these two markets, estimating the conditional…
In this article, we tackle the problem of a market maker in charge of a book of options on a single liquid underlying asset. By using an approximation of the portfolio in terms of its vega, we show that the seemingly high-dimensional…
Through the analysis of a dataset of ultra high frequency order book updates, we introduce a model which accommodates the empirical properties of the full order book together with the stylized facts of lower frequency financial data. To do…
The Maker Protocol is a decentralized finance application that enables collateralized lending. The application uses open-bid, second-price auctions to complete its loan liquidation process. In this paper, we develop a bidding function for…
\noindent We address the issue of market making on electronic markets when taking into account the clustering and long memory properties of market order flows. We consider a market model with one market maker and order flows driven by…
In this work, we investigate the market-making problem on a trading session in which a continuous phase on a limit order book is followed by a closing auction. Whereas standard optimal market-making models typically rely on terminal…
Recommendation systems when employed in markets play a dual role: they assist users in selecting their most desired items from a large pool and they help in allocating a limited number of items to the users who desire them the most. Despite…
This paper introduces a new algorithmic execution model that integrates interbank limit and market orders with internal liquidity generated through market making. Based on the Cartea et al.\cite{cartea2015algorithmic} framework, we…
In this paper, we introduce a suite of models for price-aware automated market making platforms willing to optimize their quotes. These models incorporate advanced price dynamics, including stochastic volatility, jumps, and microstructural…