Related papers: Trading on the Floor after Sweeping the Book
Passive investing has gained immense popularity due to its low fees and the perceived simplicity of focusing on zero tracking error, rather than security selection. However, our analysis shows that the passive (zero tracking error) approach…
There is a pervasive assumption that low latency access to an exchange is a key factor in the profitability of many high-frequency trading strategies. This belief is evidenced by the "arms race" undertaken by certain financial firms to…
We empirically study the market impact of trading orders. We are specifically interested in large trading orders that are executed incrementally, which we call hidden orders. These are reconstructed based on information about market member…
We study the necessity of interaction between individuals for obtaining approximately efficient allocations. The role of interaction in markets has received significant attention in economic thinking, e.g. in Hayek's 1945 classic paper. We…
We implement a market microstructure model including informed, uninformed and heuristic-driven investors, which latter behave in line with loss-aversion and mental accounting. We show that the probability of informed trading (PIN) varies…
Trading volume movement prediction is the key in a variety of financial applications. Despite its importance, there is few research on this topic because of its requirement for comprehensive understanding of information from different…
Contemporary real-world online ad auctions differ from canonical models [Edelman et al., 2007; Varian, 2009] in at least four ways: (1) values and click-through rates can depend upon users' search queries, but advertisers can only partially…
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,…
A platform charges a producer for disclosing quality evidence to consumers before trade. It aims to maximize its revenue guarantee across potentially multiple equilibria which arise from the interdependence of producer purchase decisions…
We consider a single security market based on a limit order book and two investors, with different speeds of trade execution. If the fast investor can front-run the slower investor, we show that this allows the fast trader to obtain risk…
In a unified framework we study equilibrium in the presence of an insider having information on the signal of the firm value, which is naturally connected to the fundamental price of the firm related asset. The fundamental value itself is…
We deal with the optimal execution problem when the broker's goal is to reach a performance barrier avoiding a downside barrier. The performance is provided by the wealth accumulated by trading in the market, the shares detained by the…
We study an information acquisition problem in which an informed trader acquires costly information prior to trading in the Kyle equilibrium. The cost of information acquisition is represented by an entropy cost. Regardless of the prior…
We construct an empirically founded model of a repo trade intermediated by two broker-dealers and prove multiple equilibrium and the existence of equilibrium at the joint profit maximizing volume of trade. We then present a smart contract…
We characterise the solutions to a continuous-time optimal liquidity provision problem in a market populated by informed and uninformed traders. In our model, the asset price exhibits fads -- these are short-term deviations from the…
This study identifies and quantifies a significant informational friction embedded in the SEC Form 144 disclosure regime, characterized as predictive decoupling. Drawing on a theoretical foundation of welfare economics, the article argues…
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…
Modern evolvements of the technologies have been leading to a profound influence on the financial market. The introduction of constituents like Exchange-Traded Funds, and the wide-use of advanced technologies such as algorithmic trading,…
It has been assumed that arbitrage profits are not possible in efficient markets, because future prices are not predictable. Here we show that predictability alone is not a sufficient measure of market efficiency. We instead propose to…
Intelligent robots need to generate and execute plans. In order to deal with the complexity of real environments, planning makes some assumptions about the world. When executing plans, the assumptions are usually not met. Most works have…