Related papers: Market Making with Scaled Beta Policies
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…
Market making is a fundamental trading problem in which an agent provides liquidity by continually offering to buy and sell a security. The problem is challenging due to inventory risk, the risk of accumulating an unfavourable position and…
In most OTC markets, a small number of market makers provide liquidity to other market participants. More precisely, for a list of assets, they set prices at which they agree to buy and sell. Market makers face therefore an interesting…
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…
This paper studies optimal market making for large-tick assets in the presence of latency. We consider a random walk model for the asset price, and formulate the market maker's optimization problem using Markov Decision Processes (MDP). We…
We develop a new market-making model, from the ground up, which is tailored towards high-frequency trading under a limit order book (LOB), based on the well-known classification of order types in market microstructure. Our flexible…
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…
A novel high-frequency market-making approach in discrete time is proposed that admits closed-form solutions. By taking advantage of demand functions that are linear in the quoted bid and ask spreads with random coefficients, we model the…
Trading large volumes of a financial asset in order driven markets requires the use of algorithmic execution dividing the volume in many transactions in order to minimize costs due to market impact. A proper design of an optimal execution…
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…
Ensuring sufficient liquidity is one of the key challenges for designers of prediction markets. Various market making algorithms have been proposed in the literature and deployed in practice, but there has been little effort to evaluate…
Reinforcement Learning has emerged as a promising framework for developing adaptive and data-driven strategies, enabling market makers to optimize decision-making policies based on interactions with the limit order book environment. This…
As foundation models are increasingly deployed as interacting agents in multi-agent systems, their collective behavior raises new challenges for trustworthiness, transparency, and accountability. Traditional coordination mechanisms, such as…
Market makers play an important role in providing liquidity to markets by continuously quoting prices at which they are willing to buy and sell, and managing inventory risk. In this paper, we build a multi-agent simulation of a dealer…
We develop a theoretical framework that aims to link micro-level option hedging and stock-specific factor exposure with macro-level market turbulence and explain endogenous volatility amplification during gamma-squeeze events. By explicitly…
Managing a book of options on several underlying involves controlling positions of several thousands of financial assets. It is one of the most challenging financial problems involving both pricing and microstructural modeling. An options…
We provide an explicit characterization of the optimal market making strategy in a discrete-time Limit Order Book (LOB). In our model, the number of filled orders during each period depends linearly on the distance between the fundamental…
The over-the-counter (OTC) market is characterized by a unique feature that allows market makers to adjust bid-ask spreads based on order size. However, this flexibility introduces complexity, transforming the market-making problem into a…
This paper presents a mercantile framework for the decentralised sharing of navigation expertise amongst a fleet of robots which perform regular missions into a common but variable environment. We build on our earlier work and allow…
We consider a simple model for the evolution of a limit order book in which limit orders of unit size arrive according to independent Poisson processes. The frequencies of buy limit orders below a given price level, respectively sell limit…