Related papers: Inefficiency of CFMs: hedging perspective and agen…
Automated market makers (AMMs) are a new type of trading venues which are revolutionising the way market participants interact. At present, the majority of AMMs are constant function market makers (CFMMs) where a deterministic trading…
In this paper, our objective is to develop a multi-agent financial system that incorporates simulated trading, a technique extensively utilized by financial professionals. While current LLM-based agent models demonstrate competitive…
We propose a heterogeneous agent market model (HAM) in continuous time. The market is populated by fundamental traders and chartists, who both use simple linear trading rules. Most of the related literature explores stability, price…
We study the price of anarchy of mechanisms in the presence of risk-averse agents. Previous work has focused on agents with quasilinear utilities, possibly with a budget. Our model subsumes this as a special case but also captures that…
In this paper we study the pricing and hedging of structured products in energy markets, such as swing and virtual gas storage, using the exponential utility indifference pricing approach in a general incomplete multivariate market model…
We present a framework for hedging a portfolio of derivatives in the presence of market frictions such as transaction costs, market impact, liquidity constraints or risk limits using modern deep reinforcement machine learning methods. We…
This paper addresses the trade-off between internalisation and externalisation in the management of stochastic trade flows. We consider agents who must absorb flows and manage risk by deciding whether to warehouse it or hedge in the market,…
We investigate the portfolio execution problem under a framework in which volatility and liquidity are both uncertain. In our model, we assume that a multidimensional Markovian stochastic factor drives both of them. Moreover, we model…
We study financial systems from a game-theoretic standpoint. A financial system is represented by a network, where nodes correspond to firms, and directed labeled edges correspond to debt contracts between them. The existence of cycles in…
We consider an illiquid financial market with different regimes modeled by a continuous-time finite-state Markov chain. The investor can trade a stock only at the discrete arrival times of a Cox process with intensity depending on the…
Most work in mechanism design assumes that buyers are risk neutral; some considers risk aversion arising due to a non-linear utility for money. Yet behavioral studies have established that real agents exhibit risk attitudes which cannot be…
The aim of this paper is to define the market-consistent multi-period value of an insurance liability cash flow in discrete time subject to repeated capital requirements, and explore its properties. In line with current regulatory…
We demonstrate market inefficiency in cryptoasset markets. Our approach examines investments that share a dominant risk factor but differ in their exposure to a secondary risk. We derive equilibrium restrictions that must hold regardless of…
Freight rate derivatives constitute a very popular financial tool in shipping industry, that allows to the market participants and the individuals operating in the field, to reassure their financial positions against the risk occurred by…
We study hedging and pricing of unattainable contingent claims in a non-Markovian regime-switching financial model. Our financial market consists of a bank account and a risky asset whose dynamics are driven by a Brownian motion and a…
An uncollateralized swap hedged back-to-back by a CCP swap is used to introduce FVA. The open IR01 of FVA, however, is a sure sign of risk not being fully hedged, a theoretical no-arbitrage pricing concern, and a bait to lure market risk…
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…
This paper is intended to explain, in simple terms, some of the mechanisms and agents common to multiagent financial market simulations. We first discuss the necessity to include an exogenous price time series ("the fundamental value") for…
The cryptocurrency market is volatile, non-stationary and non-continuous. Together with liquid derivatives markets, this poses a unique opportunity to study risk management, especially the hedging of options, in a turbulent market. We study…
We postulates, and then show experimentally, that liquidity deficit is the driving force of the markets. In the first part of the paper a kinematic of liquidity deficit is developed. The calculus-like approach, which is based on…