Related papers: How brokers can optimally plot against traders
We investigate activities that have different periods of duration. We define the profit intensity as a measure of this economic category. The profit intensity in a repeated trading has a unique property of attaining its maximum at a fixed…
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…
This paper studies an optimal trading problem that incorporates the trader's market view on the terminal asset price distribution and uninformative noise embedded in the asset price dynamics. We model the underlying asset price evolution by…
The dynamics of financial markets are driven by the interactions between participants, as well as the trading mechanisms and regulatory frameworks that govern these interactions. Decision-makers would rather not ignore the impact of other…
I study the optimal pricing process for selling a unit good to a buyer with prospect theory preferences. In the presence of probability weighting, the buyer is dynamically inconsistent and can be either sophisticated or naive about her own…
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…
We study a contextual version of the repeated brokerage problem. In each interaction, two traders with private valuations for an item seek to buy or sell based on the learner's-a broker-proposed price, which is informed by some contextual…
Much research has been done to analyze the stock market. After all, if one can determine a pattern in the chaotic frenzy of transactions, then they could make a hefty profit from capitalizing on these insights. As such, the goal of our…
We present results on simulations of a stock market with heterogeneous, cumulative information setup. We find a non-monotonic behaviour of traders' returns as a function of their information level. Particularly, the average informed agents…
We consider an optimal trading problem over a finite period of time during which an investor has access to both a standard exchange and a dark pool. We take the exchange to be an order-driven market and propose a continuous-time setup for…
This paper is concerned with an optimal stock selling rule under a Markov chain model. The objective is to find an optimal stopping time to sell the stock so as to maximize an expected return. Solutions to the associated variational…
We model the behavior of three agent classes acting dynamically in a limit order book of a financial asset. Namely, we consider market makers (MM), high-frequency trading (HFT) firms, and institutional brokers (IB). Given a prior dynamic of…
This paper extends the optimal-trading framework developed in arXiv:2409.03586v1 to compute optimal strategies with real-world constraints. The aim of the current paper, as with the previous, is to study trading in the context of…
Empirical evidence suggests that even the most competitive markets are not strictly efficient. Price histories can be used to predict near future returns with a probability better than random chance. Many markets can be considered as {\it…
Assuming that the stock price $Z=(Z_t)_{0\leq t\leq T}$ follows a geometric Brownian motion with drift $\mu\in\mathbb{R}$ and volatility $\sigma>0$, and letting $M_t=\max_{0\leq s\leq t}Z_s$ for $t\in[0,T]$, we consider the optimal…
It is well-known that using delta hedging to hedge financial options is not feasible in practice. Traders often rely on discrete-time hedging strategies based on fixed trading times or fixed trading prices (i.e., trades only occur if the…
This paper studies Markov perfect equilibria in a repeated duopoly model where sellers choose algorithms. An algorithm is a mapping from the competitor's price to own price. Once set, algorithms respond quickly. Customers arrive randomly…
Most finance studies are discussed on the basis of several hypotheses, for example, investors rationally optimize their investment strategies. However, the hypotheses themselves are sometimes criticized. Market impacts, where trades of…
The aim of this article is to propose a core game theory model of transaction costs wherein it is indicated how direct costs determine the probability of loss and subsequent transaction costs. The existence of optimum is proven, and the way…
We present a model of predatory traders interacting with each other in the presence of a central reserve (which dissipates their wealth through say, taxation), as well as inflation. This model is examined on a network for the purposes of…