Related papers: Macroscopic Market Making
We study the price-setting problem of market makers under risk neutrality and perfect competition in continuous time. Thereby we follow the classic Glosten-Milgrom model that defines bid and ask prices as expectations of a true value of the…
We formulate a continuous-time competitive equilibrium model of irreversible capacity investment in which a continuum of heterogeneous producers supplies a single non-durable good subject to exogenous stochastic demand. Each producer…
The paper proposes a new stochastic intervention control model conducted in various commodity and stock markets. The essence of the phenomenon of intervention is described in accordance with current economic theory. A review of papers on…
In this paper we introduce a completely continuous and time-variate model of the evolution of market limit orders based on the existence, uniqueness, and regularity of the solutions to a type of stochastic partial differential equations…
We introduce a prototype model in an attempt to capture some aspects of market dynamics simulating a trading mechanism. The model description starts with a discrete-space, continuous-time Markov process describing arrival and movement of…
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 study optimal liquidation strategies under partial information for a single asset within a finite time horizon. We propose a model tailored for high-frequency trading, capturing price formation driven solely by order flow through…
We develop a comprehensive mathematical and computational framework for optimal production planning in economies governed by stochastic regime switches driven by a continuous-time Markov chain. The value functions of the underlying…
Volume imbalance in a limit order book is often considered as a reliable indicator for predicting future price moves. In this work, we seek to analyse the nuances of the relationship between prices and volume imbalance. To this end, we…
We study a an optimal high frequency trading problem within a market microstructure model designed to be a good compromise between accuracy and tractability. The stock price is driven by a Markov Renewal Process (MRP), while market orders…
We describe an adaptive market-making architecture that preserves the analytical structure of the Avellaneda--Stoikov framework while introducing a successor measure-style adaptation mechanism. In our paper we keep Avellaneda--Stoikov fast…
We consider the issue of a market maker acting at the same time in the lit and dark pools of an exchange. The exchange wishes to establish a suitable make-take fees policy to attract transactions on its venues. We first solve the stochastic…
In this research, we develop a trading strategy for the discrete-time optimal liquidation problem of large order trading with different market microstructures in an illiquid market. In this framework, the flow of orders can be viewed as a…
In this paper, we introduce a suite of models for price-aware automated market making platforms willing to optimize their quotes. These models incorporate advanced price dynamics, including stochastic volatility, jumps, and microstructural…
We present a new microscopic stochastic model for an ensemble of interacting investors that buy and sell stocks in discrete time steps via limit orders based on individual forecasts about the price of the stock. These orders determine the…
Stochastic processes find applications in modelling systems in a variety of disciplines. A large number of stochastic models considered are Markovian in nature. It is often observed that higher order Markov processes can model the data…
This work proposes a general framework for capturing noise-driven transitions in spatially extended non-equilibrium systems and explains the emergence of coherent patterns beyond the instability onset. The framework relies on stochastic…
This study pioneers the application of the market microstructure framework to an informal financial market. By scraping data from websites and social media about the Cuban informal currency market, we model the dynamics of bid/ask…
In the present paper, we study the optimal execution problem under stochastic price recovery based on limit order book dynamics. We model price recovery after execution of a large order by accelerating the arrival of the refilling order,…
We model the stock price dynamics through a semi-Markov process obtained using a Poisson random measure. We establish the existence and uniqueness of the classical solution of a non-homogeneous terminal value problem and we show that the…