Related papers: Limit Order Book Dynamics in Matching Markets: Mic…
In this paper we propose a dynamic model of Limit Order Book (LOB). The main feature of our model is that the shape of the LOB is determined endogenously by an expected utility function via a competitive equilibrium argument. Assuming zero…
We present a perturbation theory of the market impact based on an extension of the framework proposed by [Loeper, 2018] -- originally based on [Liu and Yong, 2005] -- in which we consider only local linear market impact. We study the…
Continuous time financial market models are often motivated as scaling limits of discrete time models. The objective of this paper is to establish such a connection for a robust framework. More specifically, we consider discrete time models…
Volume imbalance in a limit order book is often considered as a reliable indicator for predicting future price moves. In this work, we seek to analyse the nuances of the relationship between prices and volume imbalance. To this end, we…
Equity auctions display several distinctive characteristics in contrast to continuous trading. As the auction time approaches, the rate of events accelerates causing a substantial liquidity buildup around the indicative price. This, in…
We study optimal trade execution strategies in financial markets with discrete order flow. The agent has a finite liquidation horizon and must minimize price impact given a random number of incoming trade counterparties. Assuming that the…
We demonstrate an application of risk-sensitive reinforcement learning to optimizing execution in limit order book markets. We represent taking order execution decisions based on limit order book knowledge by a Markov Decision Process; and…
Platform giants in China have operated with persistently compressed margins in highly concentrated markets for much of the past decade, despite market shares exceeding 60\% in core segments. Standard theory predicts otherwise: either the…
The mean-field variant of the model of limit order driven market introduced recently by Maslov is formulated and solved. The agents do not have any strategies and the memory of the system is kept within the order book. We show that he…
Limit order books can transition rapidly from stable to stressed conditions, yet standard early-warning signals such as order flow imbalance and short-term volatility are inherently reactive. We formalise this limitation via a three-regime…
We study the problem of the execution of a moderate size order in an illiquid market within the framework of a solvable Markovian model. We suppose that in order to avoid impact costs, a trader decides to execute her order through a unique…
The distribution of liquidity within the limit order book is essential for the impact of market orders on the stock price and the emergence of price shocks. Limit orders are characterized by stylized facts: The number of inserted limit…
We study competitive equilibria in the classic Shapley-Shubik assignment model with indivisible goods and unit-demand buyers, with budget constraints: buyers can specify a maximum price they are willing to pay for each item, beyond which…
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…
We present a general Markovian framework for order book modeling. Through our approach, we aim at providing a tool enabling to get a better understanding of the price formation process and of the link between microscopic and macroscopic…
We study a matching problem between agents and public goods, in settings without monetary transfers. Since goods are public, they have no capacity constraints. There is no exogenously defined budget of goods to be provided. Rather, each…
We consider a hidden-action principal-agent model, in which actions require different amounts of effort, and the agent privately knows his ability that determines his cost of effort. We show that linear contracts admit approximation…
Dynamic pricing of goods in a competitive environment to maximize revenue is a natural objective and has been a subject of research over the years. In this paper, we focus on a class of markets exhibiting the substitutes property with…
It has been suggested that marked point processes might be good candidates for the modelling of financial high-frequency data. A special class of point processes, Hawkes processes, has been the subject of various investigations in the…
Modeling the impact of the order flow on asset prices is of primary importance to understand the behavior of financial markets. Part I of this paper reported the remarkable improvements in the description of the price dynamics which can be…