Related papers: Optimal market making
Given the promising results on joint modeling of SPX/VIX smiles of the recently introduced quadratic rough Heston model, we consider a multi-asset market making problem on SPX and its derivatives, e.g. VIX futures, SPX and VIX options. The…
A platform commits to a search algorithm that maps prices to search order. Given this algorithm, sellers set prices, and consumers engage in sequential search. This framework generalizes the ordered search literature. We introduce a special…
This paper proposes a two-step framework for techno-economic analysis of a demand-side flexibility service in distribution networks. Step one applies optimization-based modelling to propose a generic problem formulation which determines the…
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…
The process of liquidity provision in financial markets can result in prolonged exposure to illiquid instruments for market makers. In this case, where a proprietary position is not desired, pro-actively targeting the right client who is…
A great deal of academic and theoretical work has been dedicated to optimal liquidation of large orders these last twenty years. The optimal split of an order through time (`optimal trade scheduling') and space (`smart order routing') is of…
We study how to maximize the broker's (expected) profit in a two-sided market, where she buys items from a set of sellers and resells them to a set of buyers. Each seller has a single item to sell and holds a private value on her item, and…
Online platforms in the Internet Economy commonly incorporate recommender systems that recommend products (or "arms") to users (or "agents"). A key challenge in this domain arises from myopic agents who are naturally incentivized to exploit…
We consider a nonlinear pricing environment with private information. We provide profit guarantees (and associated mechanisms) that the seller can achieve across all possible distributions of willingness to pay of the buyers. With a…
Automated Market Makers (AMMs) are emerging as a popular decentralised trading platform. In this work, we determine the optimal dynamic fees in a constant function market maker. We find approximate closed-form solutions to the control…
Optimal control models for limit order trading often assume that the underlying asset price is a Brownian motion since they deal with relatively short time scales. The resulting optimal bid and ask limit order prices tend to track the…
We investigate approximately optimal mechanisms in settings where bidders' utility functions are non-linear; specifically, convex, with respect to payments (such settings arise, for instance, in procurement auctions for energy). We provide…
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…
The goal of this note is to illustrate the impact of a self-financing condition recently introduced by the authors. We present the analyses of two specific applications usually considered in more traditional models in financial mathematics.…
This paper deals with an optimal position management problem for a market maker who has to face uncertain customer order flows in an illiquid market, where the market maker's continuous trading incurs a stochastic linear price impact.…
We develop from basic economic principles a continuous-time model for a large investor who trades with a finite number of market makers at their utility indifference prices. In this model, the market makers compete with their quotes for the…
The global ambitions of a carbon-neutral society necessitate a stable and robust smart grid that capitalises on frequency reserves of renewable energy. Frequency reserves are resources that adjust power production or consumption in real…
Public goods are often either over-consumed in the absence of regulatory mechanisms, or remain completely unused, as in the Covid-19 pandemic, where social distance constraints are enforced to limit the number of people who can share public…
We study resource allocation in two-sided markets from a fundamental perspective and introduce a general modeling and algorithmic framework to effectively incorporate the complex and multidimensional aspects of fairness. Our main technical…
Constant Function Market Makers (CFMMs) are a tool for creating exchange markets, have been deployed effectively in prediction markets, and are now especially prominent in the Decentralized Finance ecosystem. We show that for any set of…