Related papers: Can Insider Trading Be Committed Without Trading?
This paper studies four trading algorithms of a professional trader at a multilateral trading facility, observing a realistic two-sided limit order book whose dynamics are driven by the order book events. The identity of the trader can be…
Passive investing has gained immense popularity due to its low fees and the perceived simplicity of focusing on zero tracking error, rather than security selection. However, our analysis shows that the passive (zero tracking error) approach…
The continuous-time version of Kyle's (1985) model is studied, in which market makers are not fiduciaries. They have some market power which they utilize to set the price to their advantage, resulting in positive expected profits. This has…
The present paper shows that it can be advantageous for traders to publish their information on the true value of an asset even if they (i) cannot build a position in the asset prior to the publication of their information and (ii) cannot…
This article introduces an intrinsic entropy model that can be used as an indicator to gauge investor interest in a given exchange-traded security, along with the state of the general market corroborated by individual security trade data.…
This paper studies arbitrage pricing theory in financial markets with implicit transaction costs. We extend the existing theory to include the more realistic possibility that the price at which the investors trade is dependent on the traded…
It is known that a player in a noncooperative game can benefit by publicly restricting his possible moves before play begins. We show that, more generally, a player may benefit by publicly committing to pay an external party an amount that…
This paper does not suppose a priori that the evolution of the price of a financial asset is a semimartingale. Since possible strategies of investors are self-financing, previous prices are forced to be finite quadratic variation processes.…
The potential of machine learning to automate and control nonlinear, complex systems is well established. These same techniques have always presented potential for use in the investment arena, specifically for the managing of equity…
We present a new discrete time version of Kyle's (1985) classic model of insider trading, formulated as a generalised extensive form game. The model has three kinds of traders: an insider, random noise traders, and a market maker. The…
Starting from the observation of the real trading activity, we propose a model of a stockmarket simulating all the typical phases taking place in a stock exchange. We show that there is no need of several classes of agents once one has…
In cryptography, encryption is the process of obscuring information to make it unreadable without special knowledge. This is usually done for secrecy, and typically for confidential communications. Encryption can also be used for…
An arbitrage strategy allows a financial agent to make certain profit out of nothing, i.e., out of zero initial investment. This has to be disallowed on economic basis if the market is in equilibrium state, as opportunities for riskless…
Dealers make money by providing liquidity to clients but face flow uncertainty and thus price risk. They can efficiently skew their prices and wait for clients to mitigate risk (internalization), or trade with other dealers in the open…
In future, information may become one of the most important assets in economy. However, unlike common goods (e.g. clothing), information is troublesome in trading since the information commodities are \emph{vulnerable}, as they lose their…
In this paper we investigate discrete time trading under integer constraints, that is, we assume that the offered goods or shares are traded in integer quantities instead of the usual real quantity assumption. For finite probability spaces…
This paper studies learning in markets with aggregate uncertainty about whether trade is efficient. A long-lived seller offers prices to buyers, who are short-lived and arrive according to a Poisson process. A hidden state determines…
Market manipulation is a strategy used by traders to alter the price of financial securities. One type of manipulation is based on the process of buying or selling assets by using several trading strategies, among them spoofing is a popular…
Controller confidentiality under sensor attacks refers to whether the internal states of the controller can be estimated when the adversary knows the model of the plant and controller, while only having access to sensors, but not the…
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…