Related papers: Insider Trading with Penalties
We are concerned with optimal control strategies subject to uncertain demands. An Ornstein-Uhlenbeck process describes the uncertain demand. The transport within the supply system is modeled by the linear advection equation. We consider…
Markets have internal dynamics leading to excess volatility and other phenomena that are difficult to explain using rational expectations models. This paper studies these using a nonequilibrium price formation rule, developed in the context…
Given a stock price process, we analyse the potential of arbitrage by insiders in a context of short-selling prohibitions. We introduce the notion of minimal supermartingale measure, and we analyse its properties in connection to the…
This paper develops a theory of competitive equilibrium with indivisible goods based entirely on economic conditions on demand. The key idea is to analyze complementarity and substitutability between bundles of goods, rather than merely…
In markets with budget-constrained buyers, competitive equilibria need not be efficient in the utilitarian sense, or maximise the seller's revenue. We consider a setting with multiple divisible goods. Competitive equilibrium outcomes, and…
This paper proposes a theory of pricing premised upon the assumptions that customers dislike unfair prices---those marked up steeply over cost---and that firms take these concerns into account when setting prices. Since they do not observe…
We study equilibrium in hedonic markets, when consumers and suppliers have reservation utilities, and the utility functions are separable with respect to price. There is one indivisible good, which comes in different qualities; each…
Dynamic pricing is commonly used to regulate congestion in shared service systems. This paper is motivated by the fact that in the presence of users with varying price sensitivity (responsiveness), conventional monotonic pricing can lead to…
A fundamental economic question is that of designing revenue-maximizing mechanisms in dynamic environments. This paper considers a simple yet compelling market model to tackle this question, where forward-looking buyers arrive at the market…
The problem of designing a profit-maximizing, Bayesian incentive compatible and individually rational mechanism with flexible consumers and costly heterogeneous supply is considered. In our setup, each consumer is associated with a…
We propose a price impact model where changes in prices are purely driven by the order flow in the market. The stochastic price impact of market orders and the arrival rates of limit and market orders are functions of the market liquidity…
We study arbitrage opportunities, market viability and utility maximization in market models with an insider. Assuming that an economic agent possesses from the beginning an additional information in the form of a random variable G, which…
We consider a two-way trading problem, where investors buy and sell a stock whose price moves within a certain range. Naturally they want to maximize their profit. Investors can perform up to $k$ trades, where each trade must involve the…
We construct explicitly a bridge process whose distribution, in its own filtration, is the same as the difference of two independent Poisson processes with the same intensity and its time 1 value satisfies a specific constraint. This…
Fisher markets are those where buyers with budgets compete for scarce items, a natural model for many real world markets including online advertising. A market equilibrium is a set of prices and allocations of items such that supply meets…
Trading algorithms that execute large orders are susceptible to exploitation by order anticipation strategies. This paper studies the influence of order anticipation strategies in a multi-investor model of optimal execution under transient…
This paper extends the optimal-trading framework developed in arXiv:2409.03586v1 to compute optimal strategies with real-world constraints. The aim of the current paper, as with the previous, is to study trading in the context of…
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 study the optimal portfolio liquidation problem over a finite horizon in a limit order book with bid-ask spread and temporary market price impact penalizing speedy execution trades. We use a continuous-time modeling framework, but in…
The computation of equilibrium prices at which the supply of goods matches their demand typically relies on complete information on agents' private attributes, e.g., suppliers' cost functions, which are often unavailable in practice.…