Related papers: On Market Design and Latency Arbitrage
The notion of "relativistic finance" became ingrained in public imagination and has been asserted in many mass-media reports. Yet, despite an observed drive of the most reputable Wall Street firms to establish their servers ever closer to…
We develop a mixed control framework that combines absolutely continuous controls with impulse interventions subject to stochastic execution delays. The model extends current impulse control formulations by allowing (i) the controller to…
This article provides a novel framework to evaluate limit order tactics that highlights expected fill price, adverse price selection cost, and opportunity cost. We formulate the problem of optimal execution of market orders with nonlinear…
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…
We introduce a new stochastic duration model for transaction times in asset markets. We argue that widely accepted rules for aggregating seemingly related trades mislead inference pertaining to durations between unrelated trades: while any…
Recent technological developments have changed the fundamental ways stock markets function, bringing regulatory instances to assess the benefits of these developments. In parallel, the ongoing machine learning revolution and its multiple…
In this paper we provide a high performance solution to the problem of committing transactions while enforcing a predefined order. We provide the design and implementation of three algorithms, which deploy a specialized cooperative…
An important revenue stream for electric battery operators is often arbitraging the hourly price spreads in the day-ahead auction. The optimal approach to this is challenging if risk is a consideration as this requires the estimation of…
We introduce a simple benchmark model of dynamic matching in networked markets, where agents arrive and depart stochastically and the network of acceptable transactions among agents forms a random graph. We analyze our model from three…
The two somewhat conflicting requirements of efficiency and fairness make ATFM an unsatisfactorily solved problem, despite its overwhelming importance. In this paper, we present an economics motivated solution that is based on the notion of…
Financial options are contracts that specify the right to buy or sell an underlying asset at a strike price by an expiration date. Standard exchanges offer options of predetermined strike values and trade options of different strikes…
We develop a theory for the market impact of large trading orders, which we call metaorders because they are typically split into small pieces and executed incrementally. Market impact is empirically observed to be a concave function of…
In financial markets, the order flow, defined as the process assuming value one for buy market orders and minus one for sell market orders, displays a very slowly decaying autocorrelation function. Since orders impact prices, reconciling…
We consider an agent who needs to buy (or sell) a relatively small amount of asset over some fixed short time interval. We work at the highest frequency meaning that we wish to find the optimal tactic to execute our quantity using limit…
An arbitrage strategy allows a financial agent to make certain profit out of nothing, i.e., out of zero initial investment. This has to be disallowed on economic basis if the market is in equilibrium state, as opportunities for riskless…
We consider the problem of designing a derivatives exchange aiming at addressing clients needs in terms of listed options and providing suitable liquidity. We proceed into two steps. First we use a quantization method to select the options…
We present a perturbation theory of the market impact based on an extension of the framework proposed by [Loeper, 2018] -- originally based on [Liu and Yong, 2005] -- in which we consider only local linear market impact. We study the…
This paper presents an equilibrium model of dynamic trading, learning, and pricing by strategic investors with trading targets and price impact. Since trading targets are private, rebalancers and liquidity providers filter the child order…
We study the optimal timing of derivative purchases in incomplete markets. In our model, an investor attempts to maximize the spread between her model price and the offered market price through optimally timing her purchase. Both the…
Exploiting a precise reproduction of a stock exchange, the robustness of the Continuous Double Auction (CDA) mechanism, evaluated by means of the waiting time distributions, has been proved versus 36 different set ups made by varying both…