Related papers: Optimal market making with persistent order flow
We propose a microstructural model for the order flow in financial markets that distinguishes between {\it core orders} and {\it reaction flow}, both modeled as Hawkes processes. This model has a natural scaling limit that reconciles a…
Control reserves are power generation or consumption entities that ensure balance of supply and demand of electricity in real-time. In many countries, they are operated through a market mechanism in which entities provide bids. The system…
We study a market mechanism that sets edge prices to incentivize strategic agents to efficiently share limited network capacity. In this market, agents form coalitions, with each coalition sharing a unit capacity of a selected route and…
We consider an economy made of competing firms which are heterogeneous in their capital and use several inputs for producing goods. Their consumption policy is fixed rationally by maximizing a utility and their capital cannot fall below a…
This paper develops a mean field game framework for dynamic two-sided matching markets, extending existing matching theory by integrating micro-macro dynamics in two-sided environments. Unlike traditional matching models focusing on static…
In this paper we complete and extend our previous work on stochastic control applied to high frequency market-making with inventory constraints and directional bets. Our new model admits several state variables (e.g. market spread,…
When sales of a product are affected by randomness in demand, retailers can use dynamic pricing strategies to maximise their profits. In this article the pricing problem is formulated as a stochastic optimal control problem, where the…
In the context of investment analysis, we formulate an abstract online computing problem called a planning game and develop general tools for solving such a game. We then use the tools to investigate a practical buy-and-hold trading problem…
In this paper, we study an optimal stopping problem in the presence of model uncertainty and regime switching. The max-min formulation for robust control and the dynamic programming approach are adopted to establish a general theoretical…
We analyze an optimal trade execution problem in a financial market with stochastic liquidity. To this end we set up a limit order book model in which both order book depth and resilience evolve randomly in time. Trading is allowed in both…
We propose a stochastic game modelling the strategic interaction between market makers and traders of optimal execution type. For traders, the permanent price impact commonly attributed to them is replaced by quoting strategies implemented…
The primary objective of this paper is to conceive and develop a new methodology to detect notable changes in liquidity within an order-driven market. We study a market liquidity model which allows us to dynamically quantify the level of…
Continuous-time stochastic processes underlie many natural and engineered systems. In healthcare, autonomous driving, and industrial control, direct interaction with the environment is often unsafe or impractical, motivating offline…
This paper is a continuation of Ishitani and Kato (2015), in which we derived a continuous-time value function corresponding to an optimal execution problem with uncertain market impact as the limit of a discrete-time value function. Here,…
We model the behavior of three agent classes acting dynamically in a limit order book of a financial asset. Namely, we consider market makers (MM), high-frequency trading (HFT) firms, and institutional brokers (IB). Given a prior dynamic of…
In this paper we propose a new way of proving the value of a firm that is currently producing a certain product and faces the option to exit the market. The problem of optimal exiting is an optimal stopping problem, that can be solved using…
In this paper, we study optimal liquidation problems in a randomly-terminated horizon. We consider the liquidation of a large single-asset portfolio with the aim of minimizing a combination of volatility risk and transaction costs arising…
In most OTC markets, a small number of market makers provide liquidity to other market participants. More precisely, for a list of assets, they set prices at which they agree to buy and sell. Market makers face therefore an interesting…
We consider an optimal control problem for a linear stochastic integro-diffe\-rential equation with conic constraints on the phase variable and the control of singular-regular type. Our setting includes consumption-investment problems for…
Optimized certainty equivalents (OCEs) is a family of risk measures widely used by both practitioners and academics. This is mostly due to its tractability and the fact that it encompasses important examples, including entropic risk…