Related papers: Macroscopic Market Making
Starting from the Avellaneda-Stoikov framework, we consider a market maker who wants to optimally set bid/ask quotes over a finite time horizon, to maximize her expected utility. The intensities of the orders she receives depend not only on…
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…
Market makers continuously set bid and ask quotes for the stocks they have under consideration. Hence they face a complex optimization problem in which their return, based on the bid-ask spread they quote and the frequency at which they…
We study an optimal execution problem with uncertain market impact to derive a more realistic market model. We construct a discrete-time model as a value function for optimal execution. Market impact is formulated as the product of a…
\noindent We address the issue of market making on electronic markets when taking into account the clustering and long memory properties of market order flows. We consider a market model with one market maker and order flows driven by…
We propose a stochastic game modelling the strategic interaction between market makers and traders of optimal execution type. For traders, the permanent price impact commonly attributed to them is replaced by quoting strategies implemented…
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 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…
We design a market-making model \`a la Avellaneda-Stoikov in which the market-takers act strategically, in the sense that they design their trading strategy based on an exogenous trading signal. The market-maker chooses her quotes based on…
This paper deals with an optimal position management problem for a market maker who has to face uncertain customer order flows in an illiquid market, where the market maker's continuous trading incurs a stochastic linear price impact.…
We study an optimal execution problem in a continuous-time market model that considers market impact. We formulate the problem as a stochastic control problem and investigate properties of the corresponding value function. We find that…
Building on the macroscopic market making framework as a control problem, this paper investigates its extension to stochastic games. In the context of price competition, each agent is benchmarked against the best quote offered by the…
The topics treated in this thesis are inherently two-fold. The first part considers the problem of a market maker optimally setting bid/ask quotes over a finite time horizon, to maximize her expected utility. The intensities of the orders…
We study an optimal execution strategy for purchasing a large block of shares over a fixed time horizon. The execution problem is subject to a general price impact that gradually dissipates due to market resilience. We allow for general…
In this paper we complete and extend our previous work on stochastic control applied to high frequency market-making with inventory constraints and directional bets. Our new model admits several state variables (e.g. market spread,…
We study long-term growth-optimal strategies on a simple market with linear proportional transaction costs. We show that several problems of this sort can be solved in closed form, and explicit the non-analytic dependance of optimal…
This paper is a continuation of Ishitani and Kato (2015), in which we derived a continuous-time value function corresponding to an optimal execution problem with uncertain market impact as the limit of a discrete-time value function. Here,…
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…
A Markovian modulation captures the trend in the market and influences the market coefficients accordingly. The different scenarios presented by the market are modeled as the distinct states of a discrete-time Markov chain. In our paper, we…
We propose a price impact model where changes in prices are purely driven by the order flow in the market. The stochastic price impact of market orders and the arrival rates of limit and market orders are functions of the market liquidity…