Related papers: Market Making with Fads, Informed, and Uninformed …
Standard models in economics stress the role of intelligent agents who maximize utility. However, there may be situations where, for some purposes, constraints imposed by market institutions dominate intelligent agent behavior. We use data…
Technological advancement has lead to an increase in number and type of trading venues and diversification of goods traded. These changes have re-emphasized the importance of understanding the effects of market competition: does…
Asset liquidity in modern financial markets is a key but elusive concept. A market is often said to be liquid when the prevailing structure of transactions provides a prompt and secure link between the demand and supply of assets, thus…
Most finance studies are discussed on the basis of several hypotheses, for example, investors rationally optimize their investment strategies. However, the hypotheses themselves are sometimes criticized. Market impacts, where trades of…
Market equilibria of matching markets offer an intuitive and fair solution for matching problems without money with agents who have preferences over the items. Such a matching market can be viewed as a variation of Fisher market, albeit…
Decisions taken in our everyday lives are based on a wide variety of information so it is generally very difficult to assess what are the strategies that guide us. Stock market therefore provides a rich environment to study how people take…
We investigate a Kyle model under Gaussian assumptions where a risk-averse informed trader has imperfect information on the fundamental price of an asset. We show that an equilibrium can be constructed by considering an optimal transport…
We consider a viable market model. Suppose that new information arrives at the market. We are interested in modeling the market reaction facing to the change of information. In particular we seek for the limit on the intensity of…
In this paper we formulate and study an optimal switching problem under partial information. In our model the agent/manager/investor attempts to maximize the expected reward by switching between different states/investments. However, he is…
We study the pricing of credit derivatives with asymmetric information. The managers have complete information on the value process of the firm and on the default threshold, while the investors on the market have only partial observations,…
In this research, we present an analysis of the optimal investment, consumption, and life insurance acquisition problem for a wage earner with partial information. Our study considers the non-linear filter case where risky asset prices are…
We study an information acquisition problem in which an informed trader acquires costly information prior to trading in the Kyle equilibrium. The cost of information acquisition is represented by an entropy cost. Regardless of the prior…
We study a dynamic model of information provision. A state of nature evolves according to a Markov chain. An informed advisor decides how much information to provide to an uninformed decision maker, so as to influence his short-term…
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…
The diffusion of financial news into market prices is a complex process, making it challenging to evaluate the connections between news events and market movements. This paper introduces FININ (Financial Interconnected News Influence…
Risk-neutral pricing dictates that the discounted derivative price is a martingale in a measure equivalent to the economic measure. The residual ambiguity for incomplete markets is here resolved by minimising the entropy of the price…
As the FX markets continue to evolve, many institutions have started offering passive access to their internal liquidity pools. Market makers act as principal and have the opportunity to fill those orders as part of their risk management,…
We find closed-form solutions to the stochastic game between a broker and a mean-field of informed traders. In the finite player game, the informed traders observe a common signal and a private signal. The broker, on the other hand,…
This paper studies learning in markets with aggregate uncertainty about whether trade is efficient. A long-lived seller offers prices to buyers, who are short-lived and arrive according to a Poisson process. A hidden state determines…
In this paper we study optimal trading strategies in a financial market in which stock returns depend on a hidden Gaussian mean reverting drift process. Investors obtain information on that drift by observing stock returns. Moreover, expert…