Related papers: Market Making with Exogenous Competition
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 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…
We study a multi-agent setting in which brokers transact with an informed trader. Through a sequential Stackelberg-type game, brokers manage trading costs and adverse selection with an informed trader. In particular, supplying liquidity to…
Pricing decisions are often made when market information is still poor. In turn, existing theoretical models often reason about the response of optimal prices to changing market characteristics without exploiting all available information…
We study the economic viability of liquidity provision in decentralised exchanges (DEXs) within a structural framework in which market outcomes are endogenous. We formulate strategic interactions as a sequential game: a risk-averse…
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…
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…
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…
In the rapidly evolving landscape of eCommerce, Artificial Intelligence (AI) based pricing algorithms, particularly those utilizing Reinforcement Learning (RL), are becoming increasingly prevalent. This rise has led to an inextricable…
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…
I study symmetric competitions in which each player chooses an arbitrary distribution over a one-dimensional performance index, subject to a convex cost. I establish existence of a symmetric equilibrium, document various properties it must…
Banks routinely use neural networks to make decisions. While these models offer higher accuracy, they are susceptible to adversarial attacks, a risk often overlooked in the context of event sequences, particularly sequences of financial…
We develop a market model in which products generate state-dependent potential hidden charges. Firms differ in their ability to realize this potential. Unlike firms, consumers do not observe the state. They try to infer hidden charges from…
Financial exchanges provide incentives for limit order book (LOB) liquidity provision to certain market participants, termed designated market makers or designated sponsors. While quoting requirements typically enforce the activity of these…
In this model study of the commodity market, we present some evidence of competition of commodities for the status of money in the regime of parameters, where emergence of money is possible. The competition reveals itself as a rivalry of a…
We study a sequential price competition among $N$ sellers, each influenced by the pricing decisions of their rivals. Specifically, the demand function for each seller $i$ follows the single index model $\lambda_i(\mathbf p) = \mu_i(\langle…
Conventional models of matching markets assume that monetary transfers can clear markets by compensating for utility differentials. However, empirical patterns show that such transfers often fail to close structural preference gaps. This…
We model competition on a credence goods market governed by an imperfect label, signaling high quality, as a rank-order tournament between firms. In this market interaction, asymmetric firms jointly and competitively control the aggregate…
We study the trading activity of designated market makers (DMMs) in electronic markets using a unique dataset with audit-trail information on trader classification. DMMs may either adhere to their market-making agreements and offer…
We apply Reinforcement Learning algorithms to solve the classic quantitative finance Market Making problem, in which an agent provides liquidity to the market by placing buy and sell orders while maximizing a utility function. The optimal…