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Market making is a popular trading strategy, which aims to generate profit from the spread between the quotes posted at either side of the market. It has been shown that training market makers (MMs) with adversarial reinforcement learning…
Principal agent games are a growing area of research which focuses on the optimal behaviour of a principal and an agent, with the former contracting work from the latter, in return for providing a monetary award. While this field…
As the FX markets continue to evolve, many institutions have started offering passive access to their internal liquidity pools. Market makers act as principal and have the opportunity to fill those orders as part of their risk management,…
We consider the classic principal-agent model of contract theory, in which a principal designs an outcome-dependent compensation scheme to incentivize an agent to take a costly and unobservable action. When all of the model…
We study optimal contract design for large populations of heterogeneous agents whose actions generate network spillovers represented by an interaction function. In a linear-quadratic framework, we solve the finite-agent problem and its…
This paper explores the gain maximization problem of two nations engaging in non-cooperative bilateral trade. Probabilistic model of an exchange of commodities under different price systems is considered. Volume of commodities exchanged…
Motivated by the problem of market power in electricity markets, we introduced in previous works a mechanism for simplified markets of two agents with linear cost. In standard procurement auctions, the market power resulting from the…
We propose a multi-agent model of an asset market and study conditions that guarantee that the strategy of an individual agent cannot outperform the market. The model assumes a mean-field approximation of the market by considering an…
We consider the principal-agent problem with heterogeneous agents. Previous works assume that the principal signs independent incentive contracts with every agent to make them invest more efforts on the tasks. However, in many…
This paper studies optimal contract design in private market investing, focusing on internal decision making in venture capital and private equity firms. A principal relies on an agent who privately exerts costly due diligence effort and…
In this paper, reinforcement learning is applied to the problem of optimizing market making. A multi-agent reinforcement learning framework is used to optimally place limit orders that lead to successful trades. The framework consists of…
In this paper, the optimal pricing strategy in Avellande-Stoikov's for a monopolistic dealer is extended to a general situation where multiple dealers are present in a competitive market. The dealers' trading intensities, their optimal bid…
In a semi-realistic market simulator, independent reinforcement learning algorithms may facilitate market makers to maintain wide spreads even without communication. This unexpected outcome challenges the current antitrust law framework. We…
The problem of computing near-optimal contracts in combinatorial settings has recently attracted significant interest in the computer science community. Previous work has provided a rich body of structural and algorithmic insights into this…
We investigate the mechanism design problem faced by a principal who hires \emph{multiple} agents to gather and report costly information. Then, the principal exploits the information to make an informed decision. We model this problem as a…
Dealers make money by providing liquidity to clients but face flow uncertainty and thus price risk. They can efficiently skew their prices and wait for clients to mitigate risk (internalization), or trade with other dealers in the open…
This paper studies optimal market making for large-tick assets in the presence of latency. We consider a random walk model for the asset price, and formulate the market maker's optimization problem using Markov Decision Processes (MDP). We…
The paper studies an oligopolistic equilibrium model of financial agents who aim to share their random endowments. The risk-sharing securities and their prices are endogenously determined as the outcome of a strategic game played among all…
Since they were authorized by the U.S. Security and Exchange Commission in 1998, electronic exchanges have boomed, and by 2010 high frequency trading accounted for over 70% of equity trades in the US. Such markets are thought to increase…
We investigate a market without money in which agents can offer certain goods (or multiple copies of an agent-specific good) in exchange for goods of other agents. The exchange must be balanced in the sense that each agent should receive a…