Related papers: Market Impact: A Systematic Study of Limit Orders
Linear Fisher market is one of the most fundamental economic models. The market is traditionally examined on the basis of individual's price-taking behavior. However, this assumption breaks in markets such as online advertising and…
I study the limit of a large random economy, where a set of consumers invests in financial instruments engineered by banks, in order to optimize their future consumption. This exercise shows that, even in the ideal case of perfect…
We use a recent, high-quality data set from Nasdaq to perform an empirical analysis of order flow in a limit order book (LOB) before and after the arrival of a market order. For each of the stocks that we study, we identify a sequence of…
Machine learning (especially reinforcement learning) methods for trading are increasingly reliant on simulation for agent training and testing. Furthermore, simulation is important for validation of hand-coded trading strategies and for…
This study investigates the prevention of market manipulation using a price-impact model of financial market trading as a linear system. First, I define a trading game between speculators such that they implement a manipulation trading…
We study the efficiency of allocations in large markets with a network structure where every seller owns an edge in a graph and every buyer desires a path connecting some nodes. While it is known that stable allocations in such settings can…
We study an online market-making problem in which a learner sequentially posts bid and ask prices for a single asset while interacting with traders holding private valuations. Unlike existing online learning formulations that assume fully…
Statistical and dynamical characters of stock markets have been extensively studied, which now is providing the firm basis for econophysics and its application as ``stylized facts''. However, most of those studies are for markets under the…
We develop a new market-making model, from the ground up, which is tailored towards high-frequency trading under a limit order book (LOB), based on the well-known classification of order types in market microstructure. Our flexible…
In this paper, we build tests for the presence of residual noise in a model where the market microstructure noise is a known parametric function of some variables from the limit order book. The tests compare two distinct quasi-maximum…
The electricity industry has been one of the first to face technological changes motivated by sustainability concerns. Whilst efficiency aspects of market design have tended to focus upon market power concerns, the new policy challenges…
This paper studies a limit order book (LOB) model, in which the order dynamics depend on both, the current best available prices and the current volume density functions. For the joint dynamics of the best bid price, the best ask price, and…
Many independent studies on stocks and futures contracts have established that market impact is proportional to the square-root of the executed volume. Is market impact quantitatively similar for option markets as well? In order to answer…
Policy-relevant treatment effect estimation in a marketplace setting requires taking into account both the direct benefit of the treatment and any spillovers induced by changes to the market equilibrium. The standard way to address these…
We propose a microstructural model for the order flow in financial markets that distinguishes between {\it core orders} and {\it reaction flow}, both modeled as Hawkes processes. This model has a natural scaling limit that reconciles a…
Interference between treated and untreated units is a source of bias in marketplace experiments. In this paper, we specifically consider pricing interventions, in which a platform seeks to adjust base pricing levels at the marketplace level…
We introduce a first theory of price impact in presence of an interest-rates term structure. We explain how one can formulate instantaneous and transient price impact on bonds with different maturities, including a cross price impact that…
Using a large database of 8 million institutional trades executed in the U.S. equity market, we establish a clear crossover between a linear market impact regime and a square-root regime as a function of the volume of the order. Our…
We study the growth dynamics of the size of manufacturing firms considering competition and normal distribution of competency. We start with the fact that all components of the system struggle with each other for growth as happened in real…
Electricity markets are experiencing a rapid increase in energy storage unit participation. Unlike conventional generation resources, quantifying the competitive operation and identifying if a storage unit is exercising market power is…