Related papers: Optimal make-take fees for market making regulatio…
Following the recent literature on make take fees policies, we consider an exchange wishing to set a suitable contract with several market makers in order to improve trading quality on its platform. To do so, we use a principal-agent…
Market makers provide liquidity to other market participants: they propose prices at which they stand ready to buy and sell a wide variety of assets. They face a complex optimization problem with both static and dynamic components. They…
We consider the problem of designing a derivatives exchange aiming at addressing clients needs in terms of listed options and providing suitable liquidity. We proceed into two steps. First we use a quantization method to select the options…
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…
Recently, most stock exchanges in the U.S. employ maker-taker fees, in which an exchange pays rebates to traders placing orders in the order book and charges fees to traders taking orders from the order book. Maker-taker fees encourage…
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…
We consider the issue of a market maker acting at the same time in the lit and dark pools of an exchange. The exchange wishes to establish a suitable make-take fees policy to attract transactions on its venues. We first solve the stochastic…
We consider an agent who needs to buy (or sell) a relatively small amount of asset over some fixed short time interval. We work at the highest frequency meaning that we wish to find the optimal tactic to execute our quantity using limit…
We introduce a general framework for continuous-time betting markets, in which a bookmaker can dynamically control the prices of bets on outcomes of random events. In turn, the prices set by the bookmaker affect the rate or intensity of…
This article considers the pricing and hedging of a call option when liquidity matters, that is, either for a large nominal or for an illiquid underlying asset. In practice, as opposed to the classical assumptions of a price-taking agent in…
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…
In a semi-realistic market simulator, independent reinforcement learning algorithms may facilitate market makers to maintain wide spreads even without communication. This unexpected outcome challenges the current antitrust law framework. We…
As the FX markets continue to evolve, many institutions have started offering passive access to their internal liquidity pools. Market makers act as principal and have the opportunity to fill those orders as part of their risk management,…
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…
A speculative agent with Prospect Theory preference chooses the optimal time to purchase and then to sell an indivisible risky asset to maximize the expected utility of the round-trip profit net of transaction costs. The optimization…
We consider a trading marketplace that is populated by traders with diverse trading strategies and objectives. The marketplace allows the suppliers to list their goods and facilitates matching between buyers and sellers. In return, such a…
This study explores the design of an efficient rebate policy in auction markets, focusing on a continuous-time setting with competition among market participants. In this model, a stock exchange collects transaction fees from auction…
We consider a sequential decision-making setting where, at every round $t$, a market maker posts a bid price $B_t$ and an ask price $A_t$ to an incoming trader (the taker) with a private valuation for one unit of some asset. If the trader's…
We consider the classic principal-agent model of contract theory, in which a principal designs an outcome-dependent compensation scheme to incentivize an agent to take a costly and unobservable action. When all of the model…
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…