Related papers: How to design a derivatives market?
We consider option pricing in a regime-switching diffusion market. As the market is incomplete, there is no unique price for a derivative. We apply the good-deal pricing bounds idea to obtain ranges for the price of a derivative. As an…
A designer offers vertically-differentiated positions to agents in the absence of transfers. Agents have private outside options and may reject their offers ex-post. The designer has preferences over the quantity of agents who accept each…
In the over-the-counter market in derivatives, we sometimes see large numbers of traders taking the same position and risk. When there is this kind of concentration in the market, the position impacts the pricings of all other derivatives…
We employ a 2x3 factorial experiment to study two central factors in the design of prediction markets (PMs) for idea evaluation: the overall design of the PM, and the elasticity of market prices set by a market maker. The results show that…
Derivative pricing is about cash flow discounting at the riskfree rate. This teaching has lost its meaning post the financial crisis, due to the addition of extra value adjustments (XVA), which also made derivatives pricing and valuation a…
Quantitative structuring is a rigorous framework for the design of financial products. We show how it incorporates traditional investment ideas while supporting a more accurate expression of clients' views. We touch upon adjacent topics…
We consider derivatives written on multiple underlyings in a one-period financial market, and we are interested in the computation of model-free upper and lower bounds for their arbitrage-free prices. We work in a completely realistic…
We study a market model in which the volatility of the stock may jump at a random time from a fixed value to another fixed value. This model was already described in the literature. We present a new approach to the problem, based on partial…
We develop a general framework for incorporating distributional preferences in market design. We identify the structural properties of these preferences that guarantee the path independence of choice rules. In decentralized settings, a…
We present a new model for prediction markets, in which we use risk measures to model agents and introduce a market maker to describe the trading process. This specific choice on modelling tools brings us mathematical convenience. The…
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…
We create a formal framework for the design of informative securities in prediction markets. These securities allow a market organizer to infer the likelihood of events of interest as well as if he knew all of the traders' private signals.…
A prototype model of stock market is introduced and studied numerically. In this self-organized system, we consider only the interaction among traders without external influences. Agents trade according to their own strategy, to accumulate…
Ad exchanges are becoming an increasingly popular way to sell advertisement slots on the internet. An ad exchange is basically a spot market for ad impressions. A publisher who has already signed contracts reserving advertisement…
This paper proposes an auction type resolution for smart derivatives. It has been discussed to migrate derivatives contracts to smart contracts (smart derivatives). Automation is often discussed in this context. It is also important to…
This paper proposes a two-step framework for techno-economic analysis of a demand-side flexibility service in distribution networks. Step one applies optimization-based modelling to propose a generic problem formulation which determines the…
A marketplace is defined where the private data of suppliers (e.g., prosumers) are protected, so that neither their identity nor their level of stock is made known to end customers, while they can sell their products at a reduced price. A…
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…
Mechanism design has traditionally assumed that the set of participants are fixed and known to the mechanism (the market owner) in advance. However, in practice, the market owner can only directly reach a small number of participants (her…
We introduce a general framework for continuous-time betting markets, in which a bookmaker can dynamically control the prices of bets on outcomes of random events. In turn, the prices set by the bookmaker affect the rate or intensity of…