Related papers: Market Making with Fads, Informed, and Uninformed …
We consider a continuous-time linear-quadratic Gaussian control problem with partial observations and costly information acquisition. More precisely, we assume the drift of the state process to be governed by an unobservable…
This paper introduces an information-based model for the pricing of storable commodities such as crude oil and natural gas. The model uses the concept of market information about future supply and demand as a basis for valuation. Physical…
We consider a financial market in which traders potentially face restrictions in trading some of the available securities. Traders are heterogeneous with respect to their beliefs and risk profiles, and the market is assumed thin: traders…
A seller offers an asset in a decentralised market. Buyers have private signals about their common value. I study whether the market becomes allocatively more efficient with (i) more buyers, (ii) better-informed buyers. Both increase the…
This work addresses the buyer's inspection paradox for information markets. The paradox is that buyers need to access information to determine its value, while sellers need to limit access to prevent theft. To study this, we introduce an…
We assume the market price to diffuse in a hierarchical comb of barriers, the heights of which represent the importance of new information entering the market. We find fat tails with the desired exponent for the price change distribution,…
The continuous-time version of Kyle's (1985) model is studied, in which market makers are not fiduciaries. They have some market power which they utilize to set the price to their advantage, resulting in positive expected profits. This has…
We study statistical parameter estimation in the setting of data markets. A buyer seeks to estimate a parameter based on samples that can be purchased from competing providers that differ in their data quality and provision costs. When…
Latency (i.e., time delay) in electronic markets affects the efficacy of liquidity taking strategies. During the time liquidity takers process information and send marketable limit orders (MLOs) to the exchange, the limit order book (LOB)…
In a very simple stock market, made by only two \emph{initially equivalent} traders, we discuss how the information can affect the performance of the traders. More in detail, we first consider how the portfolios of the traders evolve in…
We investigate the optimal investment-reinsurance problem for insurance company with partial information on the market price of the risk. Through the use of filtering techniques we convert the original optimization problem involving…
We apply the theory of McKean-Vlasov-type SDEs to study several problems related to market efficiency in the context of partial information and partially observable financial markets: (i) convergence of reduced-information market price…
The computation of equilibrium prices at which the supply of goods matches their demand typically relies on complete information on agents' private attributes, e.g., suppliers' cost functions, which are often unavailable in practice.…
We consider the mean-variance hedging problem under partial information in the case where the flow of observable events does not contain the full information on the underlying asset price process. We introduce a martingale equation of a new…
Two agents trade an item in a simultaneous offer setting, where the exchange takes place if and only if the buyer's bid price weakly exceeds the seller's ask price. Each agent is randomly assigned the buyer or seller role. Both agents are…
We investigate whether the fee income from trades on the CFM is sufficient for the liquidity providers to hedge away the exposure to market risk. We first analyse this problem through the lens of continuous-time financial mathematics and…
This article considers the pricing and hedging of a call option when liquidity matters, that is, either for a large nominal or for an illiquid underlying asset. In practice, as opposed to the classical assumptions of a price-taking agent in…
Consider a trade market with one seller and multiple buyers. The seller aims to sell an indivisible item and maximize their revenue. This paper focuses on a simple and popular mechanism--the fixed-price mechanism. Unlike the standard…
The author seeks to develop a model to alter the bid-offer spread, currently quoted by market makers, that varies with the market and trading conditions. The dynamic nature of financial markets and trading, as with the rest of social…
In revenue maximization of selling a digital product in a social network, the utility of an agent is often considered to have two parts: a private valuation, and linearly additive influences from other agents. We study the incomplete…