Related papers: A Bayesian viewpoint on the price formation proces…
We consider the problem of dynamic pricing of a product in the presence of feature-dependent price sensitivity. Developing practical algorithms that can estimate price elasticities robustly, especially when information about no purchases…
The present paper proposes a new framework for describing the stock price dynamics. In the traditional geometric Brownian motion model and its variants, volatility plays a vital role. The modern studies of asset pricing expand around…
We consider a limit order book, where buyers and sellers register to trade a security at specific prices. The largest price buyers on the book are willing to offer is called the market bid price, and the smallest price sellers on the book…
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 study a financial model with a non-trivial price impact effect. In this model we consider the interaction of a large investor trading in an illiquid security, and a market maker who is quoting prices for this security. We assume that the…
Financial order flow exhibits a remarkable level of persistence, wherein buy (sell) trades are often followed by subsequent buy (sell) trades over extended periods. This persistence can be attributed to the division and gradual execution of…
Economic evaluations from individual-level data are an important component of the process of technology appraisal, with a view to informing resource allocation decisions. A critical problem in these analyses is that both effectiveness and…
In this paper, we consider an infinite horizon, continuous-review, stochastic inventory system in which cumulative customers' demand is price-dependent and is modeled as a Brownian motion. Excess demand is backlogged. The revenue is earned…
In this review article we explore several recent advances in the quantitative modeling of financial markets. We begin with the Efficient Markets Hypothesis and describe how this controversial idea has stimulated a number of new directions…
Classical Kyle-type models of informed trading typically treat noise trader demand as purely exogenous. In reality, many market participants react to price movements and news, generating feedback effects that can significantly alter market…
For premium consumer products, pricing strategy is not about a single number, but about understanding the perceived monetary value of the features that justify a higher cost. This paper proposes a robust methodology to deconstruct a…
We consider the pricing problem related to payoffs that can have discontinuities of polynomial growth. The asset price dynamic is modeled within the Black and Scholes framework characterized by a stochastic volatility term driven by a…
With the growing needs of online A/B testing to support the innovation in industry, the opportunity cost of running an experiment becomes non-negligible. Therefore, there is an increasing demand for an efficient continuous monitoring…
This paper is devoted to the important yet little explored subject of the market impact of limit orders. Our analysis is based on a proprietary database of metaorders - large orders that are split into smaller pieces before being sent to…
This paper presents an overview of information-based asset pricing. In this approach, an asset is defined by its cash-flow structure. The market is assumed to have access to "partial" information about future cash flows. Each cash flow is…
Buying and selling stocks causes price changes, which are described by the price impact function. To explain the shape of this function, we study the Island ECN orderbook. In addition to transaction data, the orderbook contains information…
Recently, there is growing interest and need for dynamic pricing algorithms, especially, in the field of online marketplaces by offering smart pricing options for big online stores. We present an approach to adjust prices based on the…
A market with asymmetric information can be viewed as a repeated exchange game between the informed sector and the uninformed one. In a market with risk-neutral agents, De Meyer [2010] proves that the price process should be a particular…
Many studies assume stock prices follow a random process known as geometric Brownian motion. Although approximately correct, this model fails to explain the frequent occurrence of extreme price movements, such as stock market crashes. Using…
Traders constantly consider the price impact associated with changing their positions. This paper seeks to understand how price impact emerges from the quoting strategies of market makers. To this end, market making is modeled as a dynamic…