Related papers: Foreign Exchange Markets with Last Look
We consider an exchange who wishes to set suitable make-take fees to attract liquidity on its platform. Using a principal-agent approach, we are able to describe in quasi-explicit form the optimal contract to propose to a market maker. This…
This paper analizes the optimal level of transfer pricing manipulation when the expected tax penalty is a function of the tax enforcement and the market price parameter. The arm's length principle implies the existence of a range of…
Financial markets such as bond, derivatives, and repo markets form networks of interdependent obligations. Existing multilateral netting methods typically trade off the extent of netting against preservation of counterparty exposure:…
This paper measures and compares the tail risks of limit and market orders using Extreme Value Theory. The analysis examines realised tail outcomes using the Dealing 2000-2 electronic broking system based on completed transactions rather…
An investor with constant relative risk aversion and an infinite planning horizon trades a risky and a safe asset with constant investment opportunities, in the presence of small transaction costs and a binding exogenous portfolio…
The problem of stock hedging is reconsidered in this paper, where a put option is chosen from a set of available put options to hedge the market risk of a stock. A formula is proposed to determine the probability that the potential loss…
Bilateral trade, a fundamental topic in economics, models the problem of intermediating between two strategic agents, a seller and a buyer, willing to trade a good for which they hold private valuations. In this paper, we cast the bilateral…
In recent years, the popularity of artificial intelligence has surged due to its widespread application in various fields. The financial sector has harnessed its advantages for multiple purposes, including the development of automated…
We analyze structure of the world foreign currency exchange (FX) market viewed as a network of interacting currencies. We analyze daily time series of FX data for a set of 63 currencies, including gold, silver and platinum. We group…
As foundation models grow in size, fine-tuning them becomes increasingly expensive. While GPU spot instances offer a low-cost alternative to on-demand resources, their volatile prices and availability make deadline-aware scheduling…
We briefly review our recent studies on stochastic processes modelling internet on-line trading. We present a way to evaluate the average waiting time between the observation of the price in financial markets and the next price change,…
We propose a new set of stylized facts quantifying the structure of financial markets. The key idea is to study the combined structure of both investment strategies and prices in order to open a qualitatively new level of understanding of…
Behavioural finance offers a valuable framework for examining foreign exchange (FX) market dynamics, including puzzles such as excess volatility and fat-tailed distributions. Yet, when it comes to their interaction with the `real' side of…
Recent years have witnessed the rise of many successful e-commerce marketplace platforms like the Amazon marketplace, AirBnB, Uber/Lyft, and Upwork, where a central platform mediates economic transactions between buyers and sellers.…
This article proposes an estimation method to detect breakpoints for linear time series models with their parameters that jump scarcely. Its basic idea owes the group LASSO (group least absolute shrinkage and selection operator). The method…
We develop an exchange rate target zone model with finite exit time and non-Gaussian tails. We show how the tails are a consequence of time-varying investor risk aversion, which generates mean-preserving spreads in the fundamental…
We model the trading activity between a broker and her clients (informed and uninformed traders) as an infinite-horizon stochastic control problem. We derive the broker's optimal dealing strategy in closed form and use this to introduce an…
We study the valuation of an American put option with a random time horizon given by the last exit time of the underlying asset from a fixed level. Since this random time is not a stopping time, the problem falls outside the classical…
Financial options are contracts that specify the right to buy or sell an underlying asset at a strike price by an expiration date. Standard exchanges offer options of predetermined strike values and trade options of different strikes…
The local Hurst exponent, a measure employed to detect the presence of dependence in a time series, may also be used to investigate the source of intraday variation observed in the returns in foreign exchange markets. Given that changes in…