Related papers: Trading on the Floor after Sweeping the Book
In an extended Kyle's model, the interactions between a large informed trader and a high-frequency trader (HFT) who can anticipate the former's incoming order are studied. We find that, in equilibrium, HFT may play the role of Small-IT or…
Prediction markets are powerful tools to elicit and aggregate beliefs from strategic agents. However, in current prediction markets, agents may exhaust the social welfare by competing to be the first to update the market. We initiate the…
This paper studies four trading algorithms of a professional trader at a multilateral trading facility, observing a realistic two-sided limit order book whose dynamics are driven by the order book events. The identity of the trader can be…
This paper studies the switching of trading strategies and its effect on the market volatility in a continuous double auction market. We describe the behavior when some uninformed agents, who we call switchers, decide whether or not to pay…
A great deal of academic and theoretical work has been dedicated to optimal liquidation of large orders these last twenty years. The optimal split of an order through time (`optimal trade scheduling') and space (`smart order routing') is of…
Electronic trading markets have evolved rapidly with continued adoption of new technologies and growing in-formation acquisition and processing capabilities. Traditional perspectives on trading performance adopted a mono-lithic view of…
We consider a Kyle-type model where insider trading takes place among a potentially large population of liquidity traders and is subject to legal penalties. Insiders exploit the liquidity provided by the trading masses to "camouflage" their…
Market efficiency at least requires the absence of weak arbitrage opportunities, but this is not sufficient to establish a situation where the market is sensitive, i.e., where it "fully reflects" or "rapidly adjusts to" some information…
Prediction markets are starting to look less like crowd polls and more like electronic markets. The central question is therefore no longer only whether these markets forecast well, but what happens when institutional liquidity enters: do…
We study the informational efficiency of a market with a single traded asset. The price initially differs from the fundamental value, about which the agents have noisy private information (which is, on average, correct). A fraction of…
This paper studies learning in markets with aggregate uncertainty about whether trade is efficient. A long-lived seller offers prices to buyers, who are short-lived and arrive according to a Poisson process. A hidden state determines…
We consider issues of time in automated trading strategies in simulated financial markets containing a single exchange with public limit order book and continuous double auction matching. In particular, we explore two effects: (i) reaction…
We show that filling an order with a large number of distinct counterparts incurs additional market impact, as opposed to filling the order with a small number of counterparts. For best execution, therefore, it may be beneficial to…
In future, information may become one of the most important assets in economy. However, unlike common goods (e.g. clothing), information is troublesome in trading since the information commodities are \emph{vulnerable}, as they lose their…
In order to reduce signalling, traders may resort to limiting access to dark venues and imposing limits on minimum fill sizes they are willing to trade. However, doing this also restricts the liquidity available to the trader since an ever…
Technological advancement has lead to an increase in number and type of trading venues and diversification of goods traded. These changes have re-emphasized the importance of understanding the effects of market competition: does…
We present a novel approach to describing the microstructure of high frequency trading using two key elements. First we introduce a new notion of informed trader which we starkly contrast to current informed trader models. We describe the…
High-frequency trading is prevalent, where automated decisions must be made quickly to take advantage of price imbalances and patterns in price action that forecast near-future movements. While many algorithms have been explored and tested,…
We study the perfect information Nash equilibrium between a broker and her clients -- an informed trader and an uniformed trader. In our model, the broker trades in the lit exchange where trades have instantaneous and transient price impact…
Modern financial market dynamics warrant detailed analysis due to their significant impact on the world. This, however, often proves intractable; massive numbers of agents, strategies and their change over time in reaction to each other…