Related papers: Multi-Asset Spot and Option Market Simulation
Market makers provide liquidity to other market participants: they propose prices at which they stand ready to buy and sell a wide variety of assets. They face a complex optimization problem with both static and dynamic components. They…
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…
Wholesale electricity markets in many jurisdictions use a two-settlement structure: a day-ahead market for bulk power transactions and a real-time market for fine-grain supply-demand balancing. This paper explores trading demand response…
We introduce a practical, interactive simulator of the limit order book for large-tick assets, designed to produce realistic execution, costs, and P&L. The book state is projected onto a tractable representation based on spread and volume…
In this work, we aim to gain a better understanding of the volatility smile observed in options markets through microsimulation (MS). We adopt two types of active traders in our MS model: speculators and arbitrageurs, and call and put…
Quantitative finance has had a long tradition of a bottom-up approach to complex systems inference via multi-agent systems (MAS). These statistical tools are based on modelling agents trading via a centralised order book, in order to…
We present results of numerical analysis of several simple models for the microstructure of a double auction market without intermediaries which were introduced in cond-mat/9808240. We perform computer simulations of the minimal model in…
In this article, we show how to calibrate the widely-used SVI parameterization of the implied volatility surface in such a way as to guarantee the absence of static arbitrage. In particular, we exhibit a large class of arbitrage-free SVI…
Recent years have seen an increased level of interest in pricing equity options under a stochastic volatility model such as the Heston model. Often, simulating a Heston model is difficult, as a standard finite difference scheme may lead to…
In this article, we tackle the problem of a market maker in charge of a book of options on a single liquid underlying asset. By using an approximation of the portfolio in terms of its vega, we show that the seemingly high-dimensional…
Automated market makers are a popular mechanism used on decentralized exchange, through which users trade assets with each other directly and automatically through a liquidity pool and a fixed pricing function. The liquidity provider…
Machine learning (especially reinforcement learning) methods for trading are increasingly reliant on simulation for agent training and testing. Furthermore, simulation is important for validation of hand-coded trading strategies and for…
Cloud providers sell their idle capacity on markets through an auction-like mechanism to increase their return on investment. The instances sold in this way are called spot instances. In spite that spot instances are usually 90% cheaper…
We calculate the realized volatility in the spin model of financial markets and examine the returns standardized by the realized volatility. We find that moments of the standardized returns agree with the theoretical values of standard…
We study the most famous example of a large financial market: the Arbitrage Pricing Model, where investors can trade in a one-period setting with countably many assets admitting a factor structure. We consider the problem of maximising…
Barrier options are one of the most widely traded exotic options on stock exchanges. In this paper, we develop a new stochastic simulation method for pricing barrier options and estimating the corresponding execution probabilities. We show…
A volatility surface is an important tool for pricing and hedging derivatives. The surface shows the volatility that is implied by the market price of an option on an asset as a function of the option's strike price and maturity. Often,…
When trading American and Asian options in the FX derivatives market, banks must calculate prices using a complex mathematical model. It is often observed that different models produce varying prices for the same exotic option, which…
With model uncertainty characterized by a convex, possibly non-dominated set of probability measures, the agent minimizes the cost of hedging a path dependent contingent claim with given expected success ratio, in a discrete-time,…
Agent-based models, particularly those applied to financial markets, demonstrate the ability to produce realistic, simulated system dynamics, comparable to those observed in empirical investigations. Despite this, they remain fairly…