Related papers: FX Market Making with Internal Liquidity
We consider a one-period Kyle (1985) framework where the insider can be subject to a penalty if she trades. We establish existence and uniqueness of equilibrium for virtually any penalty function when noise is uniform. In equilibrium, the…
We study a continuous-time version of the intermediation model of Grossman and Miller (1988). To wit, we solve for the competitive equilibrium prices at which liquidity takers' demands are absorbed by dealers with quadratic inventory costs,…
Addressing the ongoing examination of high-frequency trading practices in financial markets, we report the results of an extensive empirical study estimating the maximum possible profitability of the most aggressive such practices, and…
Liquidity and trading activity on constant function market makers (CFMMs) such as Uniswap, Curve, and Balancer has grown significantly in the second half of 2020. Much of the growth of these protocols has been driven by incentivized pools…
We examine the Foreign Exchange (FX) spot price spreads with and without Last Look on the transaction. We assume that brokers are risk-neutral and they quote spreads so that losses to latency arbitrageurs (LAs) are recovered from other…
Current approaches to the cryptocurrency automated market makers result in poor impermanent loss and capital efficiency. We analyze the mechanics underlying DODO Exchange's proactive market maker (PMM) to probe for solutions to these…
Financial models do not merely analyse markets, but actively shape them. This effect, known as performativity, describes how financial theories and the subsequent actions based on them influence market processes, by creating self-fulfilling…
We present an empirical analysis of the microstructure of financial markets and, in particular, of the static and dynamic properties of liquidity. We find that on relatively large time scales (15 minutes) large price fluctuations are…
Crypto-currency market uncertainty drives the need to find adaptive solutions to maximise gain or at least to avoid loss throughout the periods of trading activity. Given the high dimensionality and complexity of the state-action space in…
This paper is concerned with the determination of pricing strategies for a firm that in each period of a finite horizon receives replenishment quantities of a single product which it sells in two markets, e.g., a long-distance market and an…
This paper examines the role of algorithmic trading in modern financial markets. Additionally, order types, characteristics, and special features of algorithmic trading are described under the lens provided by the large development of high…
We have studied here the self-organising features of the dynamics of a model market, where the agents `trade' for a single commodity with their money. The model market consists of fixed numbers of economic agents, money supply and…
There is a pervasive assumption that low latency access to an exchange is a key factor in the profitability of many high-frequency trading strategies. This belief is evidenced by the "arms race" undertaken by certain financial firms to…
Market making (MM) is an important research topic in quantitative finance, the agent needs to continuously optimize ask and bid quotes to provide liquidity and make profits. The limit order book (LOB) contains information on all active…
We consider a discrete-time financial market model with finite time horizon and give conditions which guarantee the existence of an optimal strategy for the problem of maximizing expected terminal utility. Equivalent martingale measures are…
Prediction problems in finance go beyond estimating the unknown parameters of a model (e.g. of expected returns). This is because such a model would have to include parameters governing the market participants' propensity to change their…
We develop a model where currency issuers provide liquidity, while users in a trade network choose currency usage for trade settlement. We identify a feedback mechanism where a user's currency preference spillovers to others and increases…
In Decentralized Finance (DeFi), automated market makers typically implement liquidity provisioning protocols. These protocols allow third-party liquidity providers (LPs) to provide assets to facilitate trade in exchange for fees. This…
This research investigates liquidity dynamics in fractional ownership markets, focusing on illiquid alternative investments traded on a FinTech platform. By leveraging empirical data and employing agent-based modeling (ABM), the study…
We consider the design of private prediction markets, financial markets designed to elicit predictions about uncertain events without revealing too much information about market participants' actions or beliefs. Our goal is to design market…