Related papers: Foreign Exchange Markets with Last Look
In financial markets, liquidity is not constant over time but exhibits strong seasonal patterns. In this article we consider a limit order book model that allows for time-dependent, deterministic depth and resilience of the book and…
We consider a broker who has to place a large order which consumes a sizable part of average daily trading volume. The broker's aim is thus to minimize execution costs he incurs from the adverse impact of his trades on market prices. By…
We consider a multivariate financial market with transaction costs and study the problem of finding the minimal initial capital needed to hedge, without risk, European-type contingent claims. The model is similar to the one considered in…
This paper presents a new financial market simulator that may be used as a tool in both industry and academia for research in market microstructure. It allows multiple automated traders and/or researchers to simultaneously connect to an…
This paper studies a valuation framework for financial contracts subject to reference and counterparty default risks with collateralization requirement. We propose a fixed point approach to analyze the mark-to-market contract value with…
Given a finite set of European call option prices on a single underlying, we want to know when there is a market model which is consistent with these prices. In contrast to previous studies, we allow models where the underlying trades at a…
While page views are often sold instantly through real-time auctions when users visit websites, they can also be sold in advance via guaranteed contracts. In this paper, we present a dynamic programming model to study how an online…
We present a numerically efficient approach for learning a risk-neutral measure for paths of simulated spot and option prices up to a finite horizon under convex transaction costs and convex trading constraints. This approach can then be…
Evolutions of the trading landscape lead to the capability to exchange the same financial instrument on different venues. Because of liquidity issues, the trading firms split large orders across several trading destinations to optimize…
We consider thin incomplete financial markets, where traders with heterogeneous preferences and risk exposures have motive to behave strategically regarding the demand schedules they submit, thereby impacting prices and allocations. We…
This study introduces a new technique to recover the implicit discount factor in the derivative market using only European put and call prices: this discount is grounded in actual transactions in active markets. Moreover, this study…
In order to reduce signalling, traders may resort to limiting access to dark venues and imposing limits on minimum fill sizes they are willing to trade. However, doing this also restricts the liquidity available to the trader since an ever…
We consider the problem of option hedging in a market with proportional transaction costs. Since super-replication is very costly in such markets, we replace perfect hedging with an expected loss constraint. Asymptotic analysis for small…
We consider rate swaps which pay a fixed rate against a floating rate in presence of bid-ask spread costs. Even for simple models of bid-ask spread costs, there is no explicit strategy optimizing an expected function of the hedging error.…
We study the valuation and hedging problem of European options in a market subject to liquidity shocks. Working within a Markovian regime-switching setting, we model illiquidity as the inability to trade. To isolate the impact of such…
We consider fractional Black-Scholes market with proportional transaction costs. When transaction costs are present, one trades periodically i.e. we have the discrete trading with equidistance $n^{-1}$ between trading times. We derive a non…
We propose a projection method to estimate risk-neutral moments from option prices. We derive a finite-sample bound implying that the projection estimator attains (up to a constant) the smallest pricing error within the span of traded…
Exchanges acquire excess processing capacity to accommodate trading activity surges associated with zero-sum high-frequency trader (HFT) "duels." The idle capacity's opportunity cost is an externality of low-latency trading. We build a…
Securing necessary resources for edge computing processes via effective resource trading becomes a critical technique in supporting computation-intensive mobile applications. Conventional onsite spot trading could facilitate this paradigm…
This paper introduces and analyzes \emph{defensive rebalancing}, a novel mechanism for protecting constant-function market makers (CFMMs) from value leakage due to arbitrage. A \emph{rebalancing} transfers assets directly from one CFMM's…