Related papers: On Market Design and Latency Arbitrage
In the present work we develop a formalism to tackle the problem of optimal execution when trading market securities. More precisely, we introduce a utility function that balances market impact and timing risk, with this last being modelled…
This paper presents a new financial market simulator that may be used as a tool in both industry and academia for research in market microstructure. It allows multiple automated traders and/or researchers to simultaneously connect to an…
Dealers make money by providing liquidity to clients but face flow uncertainty and thus price risk. They can efficiently skew their prices and wait for clients to mitigate risk (internalization), or trade with other dealers in the open…
We propose a framework for studying optimal market making policies in a limit order book (LOB). The bid-ask spread of the LOB is modelled by a Markov chain with finite values, multiple of the tick size, and subordinated by the Poisson…
We introduce a new matching design for financial transactions in an electronic market. In this mechanism, called ad-hoc electronic auction design (AHEAD), market participants can trade between themselves at a fixed price and trigger an…
Algorithms having uniform convergence with respect to their initial condition (i.e., with fixed-time stability) are receiving increasing attention for solving control and observer design problems under time constraints. However, we still…
A stock market is called diverse if no stock can dominate the market in terms of relative capitalization. On one hand, this natural property leads to arbitrage in diffusion models under mild assumptions. On the other hand, it is also easy…
In this paper, a general framework is developed for continuous-time financial market models defined from simple strategies through conditional topologies that avoid stochastic calculus and do not necessitate semimartingale models. We then…
As foundation models grow in size, fine-tuning them becomes increasingly expensive. While GPU spot instances offer a low-cost alternative to on-demand resources, their volatile prices and availability make deadline-aware scheduling…
Previous research has found that high-frequency traders will vary the bid or offer price rapidly over periods of milliseconds. This is a benefit to fast traders who can time their trades with microsecond precision, however it is a cost to…
We explore the competitive effects of reaction time of automated trading strategies in simulated financial markets containing a single exchange with public limit order book and continuous double auction matching. A large body of research…
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…
Smart contracts provide the means to stipulate rules of interaction between mutually distrustful organizations. They encode contractual agreements on the basis of source code, which else need to be contractualized in natural language. While…
We consider trading against a hedge fund or large trader that must liquidate a large position in a risky asset if the market price of the asset crosses a certain threshold. Liquidation occurs in a disorderly manner and negatively impacts…
We derive the arbitrage gains or, equivalently, Loss Versus Rebalancing (LVR) for arbitrage between \textit{two imperfectly liquid} markets, extending prior work that assumes the existence of an infinitely liquid reference market. Our…
The interactions between a large population of high-frequency traders (HFTs) and a large trader (LT) who executes a certain amount of assets at discrete time points are studied. HFTs are faster in the sense that they trade continuously and…
Statistical arbitrage is a class of financial trading strategies using mean reversion models. The corresponding techniques rely on a number of assumptions which may not hold for general non-stationary stochastic processes. This paper…
We briefly review data analysis of the Island order book, part of NASDAQ, which suggests a framework to which all limit order markets should comply. Using a simple exclusion particle model, we argue that short-time price over-diffusion in…
We show that filling an order with a large number of distinct counterparts incurs additional market impact, as opposed to filling the order with a small number of counterparts. For best execution, therefore, it may be beneficial to…
This paper develops a mathematical framework for building a position in a stock over a fixed period of time while in competition with one or more other traders doing the same thing. We develop a game-theoretic framework that takes place in…