Related papers: Algorithmic and High-Frequency Trading Problems fo…
We develop a deep reinforcement learning (RL) framework for an optimal market-making (MM) trading problem, specifically focusing on price processes with semi-Markov and Hawkes Jump-Diffusion dynamics. We begin by discussing the basics of RL…
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…
The paper proposes a class of financial market models which are based on inhomogeneous telegraph processes and jump diffusions with alternating volatilities. It is assumed that the jumps occur when the tendencies and volatilities are…
We propose a framework for studying optimal market making policies in a limit order book (LOB). The bid-ask spread of the LOB is modelled by a Markov chain with finite values, multiple of the tick size, and subordinated by the Poisson…
This study examine the theoretical and empirical perspectives of the symmetric Hawkes model of the price tick structure. Combined with the maximum likelihood estimation, the model provides a proper method of volatility estimation…
Dynamic jumps in the price and volatility of an asset are modelled using a joint Hawkes process in conjunction with a bivariate jump diffusion. A state space representation is used to link observed returns, plus nonparametric measures of…
We introduce a model for limit order book of a certain security with two main features: First, both the limit orders and market orders for the given asset are allowed to appear and interact with each other. Second, the high frequency…
High Frequency Trading (HFT) represents an ever growing proportion of all financial transactions as most markets have now switched to electronic order book systems. The main goal of the paper is to propose continuous time equations which…
We study a microscopic limit order book model, in which the order dynamics depend on the current best bid and ask price and the current volume density functions, simultaneously, and derive its macroscopic high-frequency dynamics. As opposed…
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…
We perform a detailed comparison between a Markov Switching Jump Diffusion Model and a Markov Switching {\alpha}-Stable Distribution Model with respect to the analysis of non-stationary data. We show that the jump diffusion model is…
We propose a microstructural modeling framework for studying optimal market making policies in a FIFO (first in first out) limit order book (LOB). In this context, the limit orders, market orders, and cancel orders arrivals in the LOB are…
Option pricing models, essential in financial mathematics and risk management, have been extensively studied and recently advanced by AI methodologies. However, American option pricing remains challenging due to the complexity of…
This article studies a portfolio optimization problem, where the market consisting of several stocks is modeled by a multi-dimensional jump-diffusion process with age-dependent semi-Markov modulated coefficients. We study risk sensitive…
We present a detailed analysis and implementation of a splitting strategy to identify simultaneously the local-volatility surface and the jump-size distribution from quoted European prices. The underlying model consists of a jump-diffusion…
The finite state semi-Markov process is a generalization over the Markov chain in which the sojourn time distribution is any general distribution. In this article we provide a sufficient stochastic maximum principle for the optimal control…
This paper presents the solution to a European option pricing problem by considering a regime-switching jump diffusion model of the underlying financial asset price dynamics. The regimes are assumed to be the results of an observed pure…
In this paper, we propose an event-driven Limit Order Book (LOB) model that captures twelve of the most observed LOB events in exchange-based financial markets. To model these events, we propose using the state-of-the-art Neural Hawkes…
We study the problem of dynamically trading futures in a regime-switching market. Modeling the underlying asset price as a Markov-modulated diffusion process, we present a utility maximization approach to determine the optimal futures…
High-frequency market making is a liquidity-providing trading strategy that simultaneously generates many bids and asks for a security at ultra-low latency while maintaining a relatively neutral position. The strategy makes a profit from…