Related papers: A Theory of 'Auction as a Search' in speculative m…
We present a Markovian market model driven by a hidden Brownian efficient price. In particular, we extend the queue-reactive model, making its dynamics dependent on the efficient price. Our study focuses on two sub-models: a signal-driven…
Standard models in economics stress the role of intelligent agents who maximize utility. However, there may be situations where, for some purposes, constraints imposed by market institutions dominate intelligent agent behavior. We use data…
We propose and study a simple stochastic model for the dynamics of a limit order book, in which arrivals of market order, limit orders and order cancellations are described in terms of a Markovian queueing system. Through its analytical…
In this article we revisit the classic problem of tatonnement in price formation from a microstructure point of view, reviewing a recent body of theoretical and empirical work explaining how fluctuations in supply and demand are slowly…
Most modern financial markets use a continuous double auction mechanism to store and match orders and facilitate trading. In this paper we develop a microscopic dynamical statistical model for the continuous double auction under the…
We study a parsimonious but non-trivial model of the latent limit order book where orders get placed with a fixed displacement from a center price process, i.e.\ some process in-between best bid and best ask, and get executed whenever this…
Auctions are becoming an increasingly popular method for transacting business, especially over the Internet. This article presents a general approach to building autonomous bidding agents to bid in multiple simultaneous auctions for…
In the present work we introduce a novel multi-agent model with the aim to reproduce the dynamics of a double auction market at microscopic time scale through a faithful simulation of the matching mechanics in the limit order book. The…
Online auctions are one of the most fundamental facets of the modern economy and power an industry generating hundreds of billions of dollars a year in revenue. Auction theory has historically focused on the question of designing the best…
Using Trades and Quotes data from the Paris stock market, we show that the random walk nature of traded prices results from a very delicate interplay between two opposite tendencies: long-range correlated market orders that lead to…
Equity auctions display several distinctive characteristics in contrast to continuous trading. As the auction time approaches, the rate of events accelerates causing a substantial liquidity buildup around the indicative price. This, in…
We use standard physics techniques to model trading and price formation in a market under the assumption that order arrival and cancellations are Poisson random processes. This model makes testable predictions for the most basic properties…
The latent order book of \cite{donier2015fully} is one of the most promising agent-based models for market impact. This work extends the minimal model by allowing agents to exhibit mean-reversion, a commonly observed pattern in real…
A novel high-frequency market-making approach in discrete time is proposed that admits closed-form solutions. By taking advantage of demand functions that are linear in the quoted bid and ask spreads with random coefficients, we model the…
We propose a model for the dynamics of a limit order book in a liquid market where buy and sell orders are submitted at high frequency. We derive a functional central limit theorem for the joint dynamics of the bid and ask queues and show…
In recent years, a new branch of auction models called diffusion auction has extended the traditional auction into social network scenarios. The diffusion auction models the auction as a networked market whose nodes are potential customers…
Information technology has revolutionized the traditional structure of markets. The removal of geographical and time constraints has fostered the growth of online auction markets, which now include millions of economic agents worldwide and…
This paper considers a Markovian model of a limit order book where time-dependent rates are allowed. With the objective of understanding the mechanisms through which a microscopic model of an orderbook can converge to more general diffusion…
We propose a minimal theory of non-linear price impact based on a linear (latent) order book approximation, inspired by diffusion-reaction models and general arguments. Our framework allows one to compute the average price trajectory in the…
Robust mechanism design is a rising alternative to Bayesian mechanism design, which yields designs that do not rely on assumptions like full distributional knowledge. We apply this approach to mechanisms for selling a single item, assuming…