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We propose a simple stochastic model of market behavior. Dividing market participants into two groups: trend-followers and fundamentalists, we derive the general form of a stochastic equation of market dynamics. The model has two…
A market model in Stochastic Portfolio Theory is a finite system of strictly positive stochastic processes. Each process represents the capitalization of a certain stock. If at any time no stock dominates almost the entire market, which…
Turbulent dynamical systems characterized by both a high-dimensional phase space and a large number of instabilities are ubiquitous among many complex systems in science and engineering. The existence of a strange attractor in the turbulent…
Blockchain technology has been attracting much attention from both academia and industry. It brings many benefits to various applications like Internet of Things. However, there are critical issues to be addressed before its widespread…
Market making is one of the most important aspects of algorithmic trading, and it has been studied quite extensively from a theoretical point of view. The practical implementation of so-called "optimal strategies" however suffers from the…
We introduce a Cox-type model for relative intensities of orders flows in a limit order book. The model assumes that all intensities share a common baseline intensity, which may for example represent the global market activity. Parameters…
Limit Order Books (LOBs) serve as a mechanism for buyers and sellers to interact with each other in the financial markets. Modelling and simulating LOBs is quite often necessary for calibrating and fine-tuning the automated trading…
This paper focuses on some simple models of limit order book dynamics which simulate market trading mechanisms. We start with a discrete time/space Markov process and then perform a re-scaling procedure leading to a deterministic dynamical…
An algorithmic stablecoin is a type of cryptocurrency managed by algorithms (i.e., smart contracts) to dynamically minimize the volatility of its price relative to a specific form of asset, e.g., US dollar. As algorithmic stablecoins have…
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…
Algorithmic trading relies on extracting meaningful signals from diverse financial data sources, including candlestick charts, order statistics on put and canceled orders, traded volume data, limit order books, and news flow. While deep…
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…
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…
The world economy is experiencing the novel adoption of distributed currencies that are free from the control of central banks. Distributed currencies suffer from extreme volatility, and this can lead to catastrophic implications during…
We investigate the behavior of limit order books on the meso-scale motivated by order execution scheduling algorithms. To do so we carry out empirical analysis of the order flows from market and limit order submissions, aggregated from…
The blockchain paradigm provides a mechanism for content dissemination and distributed consensus on Peer-to-Peer (P2P) networks. While this paradigm has been widely adopted in industry, it has not been carefully analyzed in terms of its…
Social turbulence can affect people financial decisions, causing changes in spending and saving. During a global turbulence as significant as the COVID-19 pandemic, such changes are inevitable. Here we examine how the effects of COVID-19 on…
We develop an empirical behavioural order-driven (EBOD) model, which consists of an order placement process and an order cancellation process. Price limit rules are introduced in the definition of relative price. The order placement process…
We introduce a new Self-Organized Criticality (SOC) model for simulating price evolution in an artificial financial market, based on a multilayer network of traders. The model also implements, in a quite realistic way with respect to…
We consider a broker who has to place a large order which consumes a sizable part of average daily trading volume. The broker's aim is thus to minimize execution costs he incurs from the adverse impact of his trades on market prices. By…