Related papers: From small markets to big markets
We consider a market where a finite number of players trade an asset whose supply is a stochastic process. The price formation problem consists of finding a price process that ensures that when agents act optimally to minimize their trading…
Securities markets are quintessential complex adaptive systems in which heterogeneous agents compete in an attempt to maximize returns. Species of trading agents are also subject to evolutionary pressure as entire classes of strategies…
We construct a binary market model with memory that approximates a continuous-time market model driven by a Gaussian process equivalent to Brownian motion. We give a sufficient conditions for the binary market to be arbitrage-free. In a…
We study utility indifference prices and optimal purchasing quantities for a contingent claim, in an incomplete semi-martingale market, in the presence of vanishing hedging errors and/or risk aversion. Assuming that the average indifference…
Post Modigliani and Miller (1958), the concept of usage of arbitrage created a permanent mark on the discourses of financial framework. The arbitrage process is largely based on information dissemination amongst the stakeholders operating…
Over the past decade, many dealers have implemented algorithmic models to automatically respond to RFQs and manage flows originating from their electronic platforms. In parallel, building on the foundational work of Ho and Stoll, and later…
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…
The primary contribution of this paper resides in devising constant-factor approximation guarantees for revenue maximization in two-sided matching markets, under general pairwise rewards. A major distinction between our work and…
We study revenue maximization when a seller offers $k$ identical units to ex ante heterogeneous, unit-demand buyers. While anonymous pricing can be $\Theta(\log k)$ worse than optimal in general multi-unit environments, we show that this…
Starting from the observation of the real trading activity, we propose a model of a stockmarket simulating all the typical phases taking place in a stock exchange. We show that there is no need of several classes of agents once one has…
We study the optimal order placement strategy with the presence of a liquidity cost. In this problem, a stock trader wishes to clear her large inventory by a predetermined time horizon $T$. A trader uses both limit and market orders, and a…
We present a formal framework for the aggregation of financial markets mediated by arbitrage. Our main tool is to characterize markets via utility functions and to employ a one-to-one correspondence to limit order book states. Inspired by…
We consider the economic problem of optimal consumption and investment with power utility. We study the optimal strategy as the relative risk aversion tends to infinity or to one. The convergence of the optimal consumption is obtained for…
We present a model describing the competition between information transmission and decision making in financial markets. The solution of this simple model is recalled, and possible variations discussed. It is shown numerically that despite…
This paper studies a type of periodic utility maximization for portfolio management in an incomplete market model, where the underlying price diffusion process depends on some external stochastic factors. The portfolio performance is…
We propose to study market efficiency from a computational viewpoint. Borrowing from theoretical computer science, we define a market to be \emph{efficient with respect to resources $S$} (e.g., time, memory) if no strategy using resources…
We consider a financial market in which two securities are traded: a stock and an index. Their prices are assumed to satisfy the Black-Scholes model. Besides assuming that the index is a tradable security, we also assume that it is…
This paper studies a portfolio optimization problem in a discrete-time Markovian model of a financial market, in which asset price dynamics depend on an external process of economic factors. There are transaction costs with a structure that…
In this paper, we consider the portfolio optimization problem in a financial market under a general utility function. Empirical results suggest that if a significant market fluctuation occurs, invested wealth tends to have a notable change…
We study the problem of designing a two-sided market (double auction) to maximize the gains from trade (social welfare) under the constraints of (dominant-strategy) incentive compatibility and budget-balance. Our goal is to do so for an…