Related papers: Endogenous Liquidity Crises
A microscopically motivated theory of glassy dynamics based on an underlying random first order transition is developed to explain the magnitude of free energy barriers for glassy relaxation. A variety of empirical correlations embodied in…
This paper addresses the design of robust dynamic output feedback control for highly uncertain systems in which the unknown disturbance might be excited by the derivative of the control input. This context appears in many industrial…
We study the emergence of instabilities in a stylized model of a financial market, when different market actors calculate prices according to different (local) market measures. We derive typical properties for ensembles of large random…
Stochastic feedback systems give rise to a variety of notions of stability. The conditions for the stability of the median, mean, and variance stability conditions differ. These conditions can be stated explicitly for scalar discrete-time…
This paper studies the fill probabilities of limit orders placed at different price levels in a limit order book. These probabilities play a central role in execution optimization, as limit orders are not guaranteed to be executed and…
We develop a new market-making model, from the ground up, which is tailored towards high-frequency trading under a limit order book (LOB), based on the well-known classification of order types in market microstructure. Our flexible…
This paper derives nonlinear feedback control synthesis for general control affine systems using second-order actions---the second-order needle variations of optimal control---as the basis for choosing each control response to the current…
Self-organized criticality is a well-established phenomenon, where a system dynamically tunes its structure to operate on the verge of a phase transition. Here, we show that the dynamics inside the self-organized critical state are…
Distribution crises are manifested by a great discrepancy between the demand and the supply of a critically important good, for a period of time. In this paper, we suggest a hybrid market mechanism for minimising the negative consequences…
We study a microscopic limit order book model, in which the order dynamics depend on the current best bid and ask price and the current volume density functions, simultaneously, and derive its macroscopic high-frequency dynamics. As opposed…
In this paper, we examine in an abstract framework, how a tradeoff between efficiency and robustness arises in different dynamic oligopolistic market architectures. We consider a market in which there is a monopolistic resource provider and…
We consider a tick-by-tick model of price formation, in which buy and sell orders are modeled as self-exciting point processes (Hawkes process), similar to the one in [Bacry, Delattre, Hoffmann, Muzy, Modelling microstructure noise with…
This paper deals with a stochastic order-driven market model with waiting costs, for order books with heterogenous traders. Offer and demand of liquidity drives price formation and traders anticipate future evolutions of the order book. The…
We analyze a tractable model of a limit order book on short time scales, where the dynamics are driven by stochastic fluctuations between supply and demand. We establish the existence of a limiting distribution for the highest bid, and for…
The scope of financial systemic risk research encompasses a wide range of interbank channels and effects, including asset correlation shocks, default contagion, illiquidity contagion, and asset fire sales. This paper introduces a financial…
The goal of developing a firmer theoretical understanding of inhomogenous temporal processes -- in particular, the waiting times in some collective dynamical system -- is attracting significant interest among physicists. Quantifying the…
We have numerically studied the trapping problem in a two-dimensional lattice where particles are continuously generated. We have introduced interaction between particles and directionality of their movement. This model presents a critical…
While the long-ranged correlation of market orders and their impact on prices has been relatively well studied in the literature, the corresponding studies of limit orders and cancellations are scarce. We provide here an empirical study of…
Experiments in various neural systems found avalanches: bursts of activity with characteristics typical for critical dynamics. A possible explanation for their occurrence is an underlying network that self-organizes into a critical state.…
We study the interaction between returns and order flow imbalances in the S&P 500 E-mini futures market using a structural VAR model identified through heteroskedasticity. The model is estimated at one-second frequency for each 15-minute…