Related papers: Latency and Liquidity Risk
The limit order book (LOB) depicts the fine-grained demand and supply relationship for financial assets and is widely used in market microstructure studies. Nevertheless, the availability and high cost of LOB data restrict its wider…
Bandit algorithms solve diverse sequential decision-making problems, but are often too sample-inefficient for from-scratch personalization. To substantially reduce exploration times, latent bandit algorithms exploit cross-instance structure…
In a one-sided limit order book, satisfying some realistic assumptions, where the unaffected price process follows a Levy process, we consider a market agent that wants to liquidate a large position of shares. We assume that the agent has…
Forecasting the movements of stock prices is one the most challenging problems in financial markets analysis. In this paper, we use Machine Learning (ML) algorithms for the prediction of future price movements using limit order book data.…
We consider the problem of dynamic pricing with limited supply. A seller has $k$ identical items for sale and is facing $n$ potential buyers ("agents") that are arriving sequentially. Each agent is interested in buying one item. Each…
We present a simple dynamic equilibrium model for an online exchange where both buyers and sellers arrive according to a exogenously defined stochastic process. The structure of this exchange is motivated by the limit order book mechanism…
While historically, economists have been primarily occupied with analyzing the behaviour of the markets, electronic trading gave rise to a new class of unprecedented problems associated with market fairness, transparency and manipulation.…
This article provides a novel framework to evaluate limit order tactics that highlights expected fill price, adverse price selection cost, and opportunity cost. We formulate the problem of optimal execution of market orders with nonlinear…
We study a multi-agent setting in which brokers transact with an informed trader. Through a sequential Stackelberg-type game, brokers manage trading costs and adverse selection with an informed trader. In particular, supplying liquidity to…
We study strategic interactions in a broker-mediated market in which agents learn and exploit each other's private information. A broker provides liquidity to an informed trader and to noise traders while managing inventory in a lit market.…
This paper studies optimal motion planning subject to motion and environment uncertainties. By modeling the system as a probabilistic labeled Markov decision process (PL-MDP), the control objective is to synthesize a finite-memory policy,…
Market by order (MBO) data - a detailed feed of individual trade instructions for a given stock on an exchange - is arguably one of the most granular sources of microstructure information. While limit order books (LOBs) are implicitly…
LLM agents in markets present algorithmic collusion risks. While prior work shows LLM agents reach supracompetitive prices through tacit coordination, existing research focuses on hand-crafted prompts. The emerging paradigm of prompt…
We study the problem of optimal trading using general alpha predictors with linear costs and temporary impact. We do this within the framework of stochastic optimization with finite horizon using both limit and market orders. Consistently…
One of the key decisions in execution strategies is the choice between a passive (liquidity providing) or an aggressive (liquidity taking) order to execute a trade in a limit order book (LOB). Essential to this choice is the fill…
Traders buy and sell financial instruments in hopes of making profit, and brokers are responsible for the transaction. There are several hypotheses and conspiracy theories arguing that in some situations, brokers want their traders to lose…
Mid-price movement prediction based on limit order book (LOB) data is a challenging task due to the complexity and dynamics of the LOB. So far, there have been very limited attempts for extracting relevant features based on LOB data. In…
We propose a price impact model where changes in prices are purely driven by the order flow in the market. The stochastic price impact of market orders and the arrival rates of limit and market orders are functions of the market liquidity…
We examine the dynamics of the bid and ask queues of a limit order book and their relationship with the intensity of trade arrivals. In particular, we study the probability of price movements and trade arrivals as a function of the quote…
Market making is a fundamental trading problem in which an agent provides liquidity by continually offering to buy and sell a security. The problem is challenging due to inventory risk, the risk of accumulating an unfavourable position and…