Related papers: Liquidity in Competitive Dealer Markets
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We study a risk-sharing economy where an arbitrary number of heterogenous agents trades an arbitrary number of risky assets subject to quadratic transaction costs. For linear state dynamics, the forward-backward stochastic differential…
In this paper we explore optimal liquidation in a market populated by a number of heterogeneous market makers that have limited inventory-carrying and risk-bearing capacity. We derive a reduced form model for the dynamic of their aggregated…
Agents attempt to maximize expected profits earned by selling multiple units of a perishable product where their revenue streams are affected by the prices they quote as well as the distribution of other prices quoted in the market by other…
We study a multi-agent setting in which brokers transact with an informed trader. Through a sequential Stackelberg-type game, brokers manage trading costs and adverse selection with an informed trader. In particular, supplying liquidity to…
We study liquidity provision in the presence of exogenous competition. We consider a `reference market maker' who monitors her inventory and the aggregated inventory of the competing market makers. We assume that the competing market makers…
Network effects are the added value derived solely from the popularity of a product in an economic market. Using agent-based models inspired by statistical physics, we propose a minimal theory of a competitive market for (nearly)…
We study decentralized markets with the presence of middlemen, modeled by a non-cooperative bargaining game in trading networks. Our goal is to investigate how the network structure of the market and the role of middlemen influence the…
We propose a decentralized market model in which agents can negotiate bilateral contracts. This builds on a similar, but centralized, model of trading networks introduced by Hatfield et al. in 2013. Prior work has established that…
We analyse two models of liquidity provision to determine the retail traders' preference for marketable order routing. Order internalization is captured by a model of market makers competing for the retail order flow in a Bertrand fashion.…
We model an informed agent with information about the future value of an asset trying to maximize profits when subjected to a transaction cost as well as a market maker tasked with setting fair transaction prices. In a single auction model,…
We study a large economy in which firms cannot compute exact solutions to the non-linear equations that characterize the equilibrium price at which they can sell future output. Instead, firms use polynomial expansions to approximate prices.…
We introduce a new class of combinatorial markets in which agents have covering constraints over resources required and are interested in delay minimization. Our market model is applicable to several settings including scheduling, cloud…
Price-mediated contagion occurs when a positive feedback loop develops following a drop in asset prices which forces banks and other financial institutions to sell their holdings. Prior studies of such events fix the level of market…
Recent research in industrial organisation has investigated the essential place that middlemen have in the networks that make up our global economy. In this paper we attempt to understand how such middlemen compete with each other through a…
We study risk-sharing economies where heterogenous agents trade subject to quadratic transaction costs. The corresponding equilibrium asset prices and trading strategies are characterised by a system of nonlinear, fully-coupled…
In this article, we present a discrete time modeling framework, in which the shape and dynamics of a Limit Order Book (LOB) arise endogenously from an equilibrium between multiple market participants (agents). We use the proposed modeling…
Automated Market Makers (AMMs) are a central component of decentralized exchanges, yet their equilibrium foundations and microeconomic mechanisms remain incompletely understood. This paper develops a dynamic equilibrium framework for…
We formulate a continuous-time competitive equilibrium model of irreversible capacity investment in which a continuum of heterogeneous producers supplies a single non-durable good subject to exogenous stochastic demand. Each producer…