Related papers: Market Making under a Weakly Consistent Limit Orde…
Price Trend Prediction (PTP) based on Limit Order Book (LOB) data is a fundamental challenge in financial markets. Despite advances in deep learning, existing models fail to generalize across different market conditions and assets.…
In an order-driven financial market, the price of a financial asset is discovered through the interaction of orders - requests to buy or sell at a particular price - that are posted to the public limit order book (LOB). Therefore, LOB data…
For classification of the high frequency trading quantities, waiting times, price increments within and between sessions are referred to as the a-, b-, and c-increments. Statistics of the a-b-c-increments are computed for the Time & Sales…
We design a market-making model \`a la Avellaneda-Stoikov in which the market-takers act strategically, in the sense that they design their trading strategy based on an exogenous trading signal. The market-maker chooses her quotes based on…
We study the problem of dynamically trading futures in a regime-switching market. Modeling the underlying asset price as a Markov-modulated diffusion process, we present a utility maximization approach to determine the optimal futures…
The over-the-counter (OTC) market is characterized by a unique feature that allows market makers to adjust bid-ask spreads based on order size. However, this flexibility introduces complexity, transforming the market-making problem into a…
We propose a microstructural model for the order flow in financial markets that distinguishes between {\it core orders} and {\it reaction flow}, both modeled as Hawkes processes. This model has a natural scaling limit that reconciles a…
We investigate the portfolio execution problem under a framework in which volatility and liquidity are both uncertain. In our model, we assume that a multidimensional Markovian stochastic factor drives both of them. Moreover, we model…
Order placement tactics play a crucial role in high-frequency trading algorithms and their design is based on understanding the dynamics of the order book. Using high quality high-frequency data and a set of microstructural features, we…
In the domain of the so called Econophysics some attempts already have been made for applying the theory of Thermodynamics and Statistical Mechanics to economics and financial markets. In this paper a similar approach is made from a…
We study the dynamics of the limit order book of liquid stocks after experiencing large intra-day price changes. In the data we find large variations in several microscopical measures, e.g., the volatility the bid-ask spread, the bid-ask…
While the market impact of aggressive orders has been extensively studied, the impact of passive orders, those executed through limit orders, remains less understood. The goal of this paper is to investigate passive market impact by…
A consistency criterion for price impact functions in limit order markets is proposed that prohibits chain arbitrage exploitation. Both the bid-ask spread and the feedback of sequential market orders of the same kind onto both sides of the…
Although behavioral economics has demonstrated that there are many situations where rational choice is a poor empirical model, it has so far failed to provide quantitative models of economic problems such as price formation. We make a step…
This paper studies optimal liquidity provision for perpetual contracts when the funding rate is a stochastic state variable. The core extension to classical market making is the coupling between inventory and funding payments: inventory…
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…
A hypothetical risk-neutral agent who trades to maximize the expected profit of the next trade will approximately exhibit long-term optimal behavior as long as this agent uses the vector $p = \nabla V (t, x)$ as effective microstructure…
This paper presents a limit order book (LOB) market mechanism design for transactive energy systems. The proposed design is planned for deployment in New Hampshire and Maine under a US Department of Energy Connected Communities project. The…
The limit order book mechanism has been the core trading mechanism of the modern financial market. In the cryptocurrency market, centralized exchanges also adopt this limit order book mechanism and a centralized matching engine dynamically…
In this chapter we review some recent results on the dynamics of price formation in financial markets and its relations with the efficient market hypothesis. Specifically, we present the limit order book mechanism for markets and we…