Related papers: Insider Trading with Penalties
We consider a single security market based on a limit order book and two investors, with different speeds of trade execution. If the fast investor can front-run the slower investor, we show that this allows the fast trader to obtain risk…
In this paper, we study decentralized decision-making where agents optimize private objectives under incomplete information and imperfect public monitoring, in a non-cooperative setting. By shaping utilities-embedding shadow prices or…
We develop a tractable equilibrium model for price formation in intraday electricity markets in the presence of intermittent renewable generation. Using stochastic control theory, we identify the optimal strategies of agents with market…
This article considers the pricing and hedging of a call option when liquidity matters, that is, either for a large nominal or for an illiquid underlying asset. In practice, as opposed to the classical assumptions of a price-taking agent in…
We consider a class of generalized capital asset pricing models in continuous time with a finite number of agents and tradable securities. The securities may not be sufficient to span all sources of uncertainty. If the agents have…
We propose a framework to study optimal trading policies in a one-tick pro-rata limit order book, as typically arises in short-term interest rate futures contracts. The high-frequency trader has the choice to trade via market orders or…
We study the most famous example of a large financial market: the Arbitrage Pricing Model, where investors can trade in a one-period setting with countably many assets admitting a factor structure. We consider the problem of maximising…
The Kyle model describes how an equilibrium of order sizes and security prices naturally arises between a trader with insider information and the price providing market maker as they interact through a series of auctions. Ever since being…
We develop inference under model uncertainty due to weak, noisy, multiple candidate restrictions and theories, and nuisance control covariates. A unified framework is given with degrees of misspecification and corresponding shadow prices,…
This paper presents a continuous-time model of intraday trading, pricing, and liquidity with dynamic TWAP and VWAP benchmarks. The model is solved in closed-form for the competitive equilibrium and also for non-price-taking equilibria. The…
Optimal execution is a sequential decision-making problem for cost-saving in algorithmic trading. Studies have found that reinforcement learning (RL) can help decide the order-splitting sizes. However, a problem remains unsolved: how to…
In this paper, we present a multi-period trading model by assuming that traders face not only asymmetric information but also heterogenous prior beliefs, under the requirement that the insider publicly disclose his stock trades after the…
Linear Fisher market is one of the most fundamental economic models. The market is traditionally examined on the basis of individual's price-taking behavior. However, this assumption breaks in markets such as online advertising and…
We study the range of prices at which a rational agent should contemplate transacting a financial contract outside a given securities market. Trading is subject to nonproportional transaction costs and portfolio constraints and full…
In a financial market with a continuous price process and proportional transaction costs we investigate the problem of utility maximization of terminal wealth. We give sufficient conditions for the existence of a shadow price process,…
We prove the existence of an equilibrium in a model with transaction costs and price impact where two agents are incentivized to trade towards a target. The two types of frictions -- price impact and transaction costs -- lead the agents to…
We study the efficiency of sequential first-price item auctions at (subgame perfect) equilibrium. This auction format has recently attracted much attention, with previous work establishing positive results for unit-demand valuations and…
We develop a theory for the market impact of large trading orders, which we call metaorders because they are typically split into small pieces and executed incrementally. Market impact is empirically observed to be a concave function of…
We show that the problem of existence of equilibrium in Kyle's continuous time insider trading model can be tackled by considering a forward-backward system coupled via an optimal transport type constraint at maturity. The forward component…
We study the conditions under which input-output networks can dynamically attain a competitive equilibrium, where markets clear and profits are zero. We endow a classical firm network model with minimal dynamical rules that reduce…