Related papers: Analyzing and modelling 1+1d markets
It is believed by the majority today that the efficient market hypothesis is imperfect because of market irrationality. Using the physical concepts and mathematical structures of quantum mechanics, we construct an econophysics framework for…
We investigate present some new statistical properties of order books. We analyse data from the Nasdaq and investigate (a) the statistics of incoming limit order prices, (b) the shape of the average order book, and (c) the typical life time…
We introduce and study a non-equilibrium continuous-time dynamical model of the price of a single asset traded by a population of heterogeneous interacting agents in the presence of uncertainty and regulatory constraints. The model takes…
We present a simple order book mechanism that regulates an artificial financial market with self-organized criticality dynamics and fat tails of returns distribution. The model shows the role played by individual imitation in determining…
We propose a microstructural modeling framework for studying optimal market making policies in a FIFO (first in first out) limit order book (LOB). In this context, the limit orders, market orders, and cancel orders arrivals in the LOB are…
We introduce the Estimated Dynamic Equilibrium Model (EDEM), an agent-based framework that treats supply and demand as a coupled stochastic process driven by heterogeneous, noisy agent valuations. The model's primary technical contribution…
We analyze a tractable model of a limit order book on short time scales, where the dynamics are driven by stochastic fluctuations between supply and demand. We establish the existence of a limiting distribution for the highest bid, and for…
This work is motivated by our collaboration with a large consumer packaged goods (CPG) company. We have found that while the company appreciates the advantages of dynamic pricing, they deem it operationally much easier to plan out a static…
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…
It is known that the impact of transactions on stock price (market impact) is a concave function of the size of the order, but there exists little quantitative theory that suggests why this is so. I develop a quantitative theory for the…
Efficiently accommodating uncertain renewable resources in wholesale electricity markets is among the foremost priorities of market regulators in the US, UK and EU nations. However, existing deterministic market designs fail to internalize…
We propose a general non-linear order book model that is built from the individual behaviours of the agents. Our framework encompasses Markovian and Hawkes based models. Under mild assumptions, we prove original results on the ergodicity…
One popular approach to model the limit order books dynamics of the best bid and ask at level-1 is to use the reduced-form diffusion approximations. It is well known that the biggest contributing factor to the price movement is the…
As energy markets begin clearing at sub-hourly rates, their interaction with load control systems becomes a potentially important consideration. A simple model for the control of thermal systems using market-based power distribution…
We introduce a Cox-type model for relative intensities of orders flows in a limit order book. The model assumes that all intensities share a common baseline intensity, which may for example represent the global market activity. Parameters…
An approach to analyse the properties of a particle system is to compare it with different processes to understand when one of them is larger than other ones. The main technique for that is coupling, which may not be easy to construct. We…
The present paper describes a practical example in which the probability distribution of the prices of a stock market blue chip is calculated as the wave function of a quantum particle confined in a potential well. This model may naturally…
We introduce a simple benchmark model of dynamic matching in networked markets, where agents arrive and depart stochastically and the network of acceptable transactions among agents forms a random graph. We analyze our model from three…
We study price formation in intraday electricity markets in the presence of intermittent renewable generation. We consider the setting where a major producer may interact strategically with a large number of small producers. Using…
We develop a new market-making model, from the ground up, which is tailored towards high-frequency trading under a limit order book (LOB), based on the well-known classification of order types in market microstructure. Our flexible…