Related papers: Performative Market Making
The financial market trend forecasting method is emerging as a hot topic in financial markets today. Many challenges still currently remain, and various researches related thereto have been actively conducted. Especially, recent research of…
In this article we propose a study of market models starting from a set of axioms, as one does in the case of risk measures. We define a market model simply as a mapping from the set of adapted strategies to the set of random variables…
Choice modeling is at the core of understanding how changes to the competitive landscape affect consumer choices and reshape market equilibria. In this paper, we propose a fundamental characterization of choice functions that encompasses a…
This paper offers a synthesis of the empirical literature on the effects of monetary policy. Using the findings from an extensive collection of meta-analyses, it evaluates the effectiveness of conventional and unconventional monetary policy…
We demonstrate that minority mechanisms arise in the dynamics of markets because of effects of price impact; accordingly the relative importance of minority and delayed majority mechanisms depends on the frequency of trading. We then use…
Decision-makers often act in response to data-driven predictions, with the goal of achieving favorable outcomes. In such settings, predictions don't passively forecast the future; instead, predictions actively shape the distribution of…
In complex systems, many different parts interact in non-obvious ways. Traditional research focuses on a few or a single aspect of the problem so as to analyze it with the tools available. To get a better insight of phenomena that emerge…
We show, by studying in detail the market prices of options on liquid markets, that the market has empirically corrected the simple, but inadequate Black-Scholes formula to account for two important statistical features of asset…
A dynamical model is introduced for the formation of a bullish or bearish trends driving an asset price in a given market. Initially, each agent decides to buy or sell according to its personal opinion, which results from the combination of…
Interaction strategies for reward in competitive environments are significantly influenced by the nature and extent of available information. In financial markets, particularly foreign exchange (forex), traders operate independently with…
We present and study a Minority Game based model of a financial market where adaptive agents -- the speculators -- interact with deterministic agents -- called producers. Speculators trade only if they detect predictable patterns which…
We study a financial model with a non-trivial price impact effect. In this model we consider the interaction of a large investor trading in an illiquid security, and a market maker who is quoting prices for this security. We assume that the…
Trading large volumes of a financial asset in order driven markets requires the use of algorithmic execution dividing the volume in many transactions in order to minimize costs due to market impact. A proper design of an optimal execution…
Using Trades and Quotes data from the Paris stock market, we show that the random walk nature of traded prices results from a very delicate interplay between two opposite tendencies: long-range correlated market orders that lead to…
The objective of this paper is to explore how financial big data and machine learning methods can be applied to model and understand financial products. We focus on residential mortgage backed securities, resMBS, which were at the heart of…
When predictions are performative, the choice of which predictor to deploy influences the distribution of future observations. The overarching goal in learning under performativity is to find a predictor that has low \emph{performative…
Personalisation of products and services is fast becoming the driver of success in banking and commerce. Machine learning holds the promise of gaining a deeper understanding of and tailoring to customers' needs and preferences. Whereas…
Prediction markets mobilize financial incentives to forecast binary event outcomes through the aggregation of dispersed beliefs and heterogeneous information. Their growing popularity and demonstrated predictive accuracy in political…
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…
Traders constantly consider the price impact associated with changing their positions. This paper seeks to understand how price impact emerges from the quoting strategies of market makers. To this end, market making is modeled as a dynamic…