Related papers: Limit Order Book Dynamics in Matching Markets: Mic…
We propose a modeling framework for the dynamics of a reduced form order book in event time and based on event sizes. Our framework for the order book is influenced by [9], but compared to [9] we allow the best bid ask spread to be larger…
Although behavioral economics has demonstrated that there are many situations where rational choice is a poor empirical model, it has so far failed to provide quantitative models of economic problems such as price formation. We make a step…
A novel high-frequency market-making approach in discrete time is proposed that admits closed-form solutions. By taking advantage of demand functions that are linear in the quoted bid and ask spreads with random coefficients, we model the…
We consider a stochastic model for the dynamics of the two-sided limit order book (LOB). Our model is flexible enough to allow for a dependence of the price dynamics on volumes. For the joint dynamics of best bid and ask prices and the…
We present a general framework for modelling the dynamics of limit order books, built on the combination of two modelling ingredients: the order flow, modelled as a general spatial point process, and market clearing, modelled via a…
This study examines the impact of different computing implementations of clearing mechanisms on multi-asset price dynamics within an artificial stock market framework. We show that sequential processing of order books introduces a…
Traditional bulk load flexibility options, such as load shifting and load curtailment, for managing uncertainty in power markets limit the diversity of options and ignore the preferences of the individual loads, thus reducing efficiency and…
We provide an explicit characterization of the optimal market making strategy in a discrete-time Limit Order Book (LOB). In our model, the number of filled orders during each period depends linearly on the distance between the fundamental…
Constant price impact functions, much used in financial literature, are shown to give rise to paradoxical outcomes since they do not allow for proper predictability removal: for instance the exploitation of a single large trade whose size…
A fundamental economic question is that of designing revenue-maximizing mechanisms in dynamic environments. This paper considers a simple yet compelling market model to tackle this question, where forward-looking buyers arrive at the market…
With the fragmentation of electronic markets, exchanges are now competing in order to attract trading activity on their platform. Consequently, they developed several regulatory tools to control liquidity provision / consumption on their…
We consider a framework for solving optimal liquidation problems in limit order books. In particular, order arrivals are modeled as a point process whose intensity depends on the liquidation price. We set up a stochastic control problem in…
In this work, we aim to reconcile several apparently contradictory observations in market microstructure: is the famous "square-root law" of metaorder impact, which decays with time, compatible with the random-walk nature of prices and the…
This paper introduces a discrete limit order book model where new orders are placed with a fixed displacement from the mid-price. Further, the trade event occurs whenever the mid-price hits the price level on which there is some volume.…
A limit order book provides information on available limit order prices and their volumes. Based on these quantities, we give an empirical result on the relationship between the bid-ask liquidity balance and trade sign and we show that…
We study the performance of general dynamic matching models. This model is defined by a connected graph, where nodes represent the class of items and the edges the compatibilities between items. Items of different classes arrive one by one…
The paper studies sub and super-replication price bounds for contingent claims defined on general trajectory based market models. No prior probabilistic or topological assumptions are placed on the trajectory space, trading is assumed to…
We study revenue maximization in a buyer-seller setting where the seller has a single object and the buyer has both a private valuation and a private budget. Private budgets complicate the classic single-product monopoly problem, making…
We define a stochastic model of a two-sided limit order book in terms of its key quantities \textit{best bid [ask] price} and the \textit{standing buy [sell] volume density}. For a simple scaling of the discreteness parameters, that keeps…
This study pioneers the application of the market microstructure framework to an informal financial market. By scraping data from websites and social media about the Cuban informal currency market, we model the dynamics of bid/ask…