Related papers: Market Making with Exogenous Competition
This paper discusses endogenous treatment models with duration outcomes, competing risks and random right censoring. The endogeneity issue is solved using a discrete instrumental variable. We show that the competing risks model generates a…
We review the evidence that the erratic dynamics of markets is to a large extent of endogenous origin, i.e. determined by the trading activity itself and not due to the rational processing of exogenous news. In order to understand why and…
We propose a dynamical model of price formation on a spatial market where sellers and buyers are placed on the nodes of a graph, and the distribution of the buyers depends on the positions and prices of the sellers. We find that, depending…
In this article, we tackle the problem of a market maker in charge of a book of options on a single liquid underlying asset. By using an approximation of the portfolio in terms of its vega, we show that the seemingly high-dimensional…
We analyze the structure of the market for foundation models, i.e., large AI models such as those that power ChatGPT and that are adaptable to downstream uses, and we examine the implications for competition policy and regulation. We…
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 study mixed bundling and competitive price-matching guarantees (PMGs) in a duopoly selling complementary products to heterogeneous customers. One retailer offers mixed bundling while the rival sells only a bundle. We characterize unique…
This paper develops a model for option market making in which the hedging activity of the market maker generates price impact on the underlying asset. The option order flow is modeled by Cox processes, with intensities depending on the…
We propose new results for the existence and uniqueness of a general nonparametric and nonseparable competitive equilibrium with substitutes. These results ensure the invertibility of a general competitive system. The existing literature…
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…
\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 consider a sequential decision-making setting where, at every round $t$, a market maker posts a bid price $B_t$ and an ask price $A_t$ to an incoming trader (the taker) with a private valuation for one unit of some asset. If the trader's…
We study one-shot Nash competition between an arbitrary number of identical dealers that compete for the order flow of a client. The client trades either because of proprietary information, exposure to idiosyncratic risk, or a mix of both…
We consider an intermediary's problem of dynamically matching demand and supply of heterogeneous types in a periodic-review fashion. More specifically, there are two disjoint sets of demand and supply types, and a reward associated with…
Motivated by the emergence of local groundwater exchanges, we construct and analyze stochastic models of dynamic groundwater markets. Our primary focus is endogenizing the price formation and groundwater pumping strategies in a closed…
In the present work, we study the advertising competition of several marketing campaigns who need to determine how many resources to allocate to potential customers to advertise their products through direct marketing while taking into…
We consider portfolio selection under nonparametric $\alpha$-maxmin ambiguity in the neighbourhood of a reference distribution. We show strict concavity of the portfolio problem under ambiguity aversion. Implied demand functions are…
The problem of market clearing is to set a price for an item such that quantity demanded equals quantity supplied. In this work, we cast the problem of predicting clearing prices into a learning framework and use the resulting models to…
This paper introduces a new representation for the actions of a market maker in an order-driven market. This representation uses scaled beta distributions, and generalises three approaches taken in the artificial intelligence for market…
We study a model of competitive information design in an oligopoly search market with heterogeneous consumer search costs. A unique class of equilibria -- upper-censorship equilibria -- emerges under intense competition. In equilibrium,…