Related papers: Optimal Bookmaking
We show, under weaker assumptions than in the previous literature, that a perpetual optimal stopping game always has a value. We also show that there exists an optimal stopping time for the seller, but not necessarily for the buyer.…
Auctions are markets with strict regulations governing the information available to traders in the market and the possible actions they can take. Since well designed auctions achieve desirable economic outcomes, they have been widely used…
This paper develops a model for option market making in which the hedging activity of the market maker generates price impact on the underlying asset. The option order flow is modeled by Cox processes, with intensities depending on the…
We consider the pricing problem faced by a seller who assigns a price to a good that confers its benefits not only to its buyers, but also to other individuals around them. For example, a snow-blower is potentially useful not only to the…
We propose a dynamic model of a prediction market in which agents predict the values of a sequence of random vectors. The main result shows that if there are agents who make correct (or asymptotically correct) next-period forecasts, then…
We construct and study market models admitting optimal arbitrage. We say that a model admits optimal arbitrage if it is possible, in a zero-interest rate setting, starting with an initial wealth of 1 and using only positive portfolios, to…
We consider a broker who has to place a large order which consumes a sizable part of average daily trading volume. The broker's aim is thus to minimize execution costs he incurs from the adverse impact of his trades on market prices. By…
We consider a continuous-time game-theoretic model of an investment market with short-lived assets and endogenous asset prices. The first goal of the paper is to formulate a stochastic equation which determines wealth processes of investors…
Information in the form of data, which can be stored and transferred between users, can be viewed as an intangible commodity, which can be traded in exchange for money. Determining the fair price at which a string of data should be traded…
Gambles are random variables that model possible changes in monetary wealth. Classic decision theory transforms money into utility through a utility function and defines the value of a gamble as the expectation value of utility changes.…
This paper studies the optimal investment problem with random endowment in an inventory-based price impact model with competitive market makers. Our goal is to analyze how price impact affects optimal policies, as well as both pricing rules…
The goal of the paper is to introduce a set of problems which we call mean field games of timing. We motivate the formulation by a dynamic model of bank run in a continuous-time setting. We briefly review the economic and game theoretic…
A risk-neutral valuation framework is developed for pricing and hedging in-play football bets based on modelling scores by independent Poisson processes with constant intensities. The Fundamental Theorems of Asset Pricing are applied to…
With the emergence of new online channels and information technology, digital advertising tends to substitute more and more to traditional advertising by offering the opportunity to companies to target the consumers/users that are really…
Employing probabilistic techniques we compute best possible upper and lower bounds on the price of an option on one or two assets with continuous piecewise linear payoff function based on prices of simple call options of possibly distinct…
Most betting market models employ static frameworks that condition decisions on final odds. Using a unique dataset of interim odds from Japanese horse racing, this study examines the validity of such static analyses by asking whether there…
Consider a market where a seller owns an item for sale and a buyer wants to purchase it. Each player has private information, known as their type. It can be costly and difficult for the players to reach an agreement through direct…
This paper develops a mathematical framework for building a position in a stock over a fixed period of time while in competition with one or more other traders doing the same thing. We develop a game-theoretic framework that takes place in…
An investor trades a safe and several risky assets with linear price impact to maximize expected utility from terminal wealth. In the limit for small impact costs, we explicitly determine the optimal policy and welfare, in a general…
We study a continuous time contracting model in which a principal hires a risk averse agent to manage a project over a finite horizon and provides sequential payments whose timing is endogenously determined. The resulting nonzero-sum…