Related papers: Inner Market as a "Black Box"
Market making refers to a form of trading in financial markets characterized by passive orders which add liquidity to limit order books. Market makers are important for the proper functioning of financial markets worldwide. Given the…
Observations indicate that the distributions of stock returns in financial markets usually do not conform to normal distributions, but rather exhibit characteristics of high peaks, fat tails and biases. In this work, we assume that the…
We investigate and defend the possibility of causing a stock market crash via small manipulations of individual stock values that together realize an adversarial example to financial forecasting models, causing these models to make the…
We propose a frustrated and disordered many-body model of a stockmarket in which independent adaptive traders can trade a stock subject to the economic law of supply and demand. We show that the typical scaling properties and the correlated…
We look at the internal structure of neural networks which is usually treated as a black box. The easiest and the most comprehensible thing to do is to look at a binary classification and try to understand the approach a neural network…
The world's stock markets display a strikingly suspicious, decades long pattern of overnight and intraday returns that nobody (other than us) has plausibly explained and that nobody (other than us) has clearly and persistently alerted you…
A financial system contains many elements networked by their relationships. Extensive works show that topological structure of the network stores rich information on evolutionary behaviors of the system such as early warning signals of…
Financial markets display scale-free behavior in many different aspects. The power-law behavior of part of the distribution of individual wealth has been recognized by Pareto as early as the nineteenth century. Heavy-tailed and scale-free…
We show that filling an order with a large number of distinct counterparts incurs additional market impact, as opposed to filling the order with a small number of counterparts. For best execution, therefore, it may be beneficial to…
Financial markets can be seen as complex systems in non-equilibrium steady state, one of whose most important properties is the distribution of price fluctuations. Recently, there have been assertions that this distribution is qualitatively…
We discuss the theoretical machinery involved in predicting financial market movements using an artificial market model which has been trained on real financial data. This approach to market prediction - in particular, forecasting financial…
In social network markets, the act of consumer choice in these industries is governed not just by the set of incentives described by conventional consumer demand theory, but by the choices of others in which an individual's payoff is an…
We empirically study the market impact of trading orders. We are specifically interested in large trading orders that are executed incrementally, which we call hidden orders. These are reconstructed based on information about market member…
The financial market is a complex dynamical system composed of a large variety of intricate relationships between several entities, such as banks, corporations and institutions. At the heart of the system lies the stock exchange mechanism,…
We analyse two models of liquidity provision to determine the retail traders' preference for marketable order routing. Order internalization is captured by a model of market makers competing for the retail order flow in a Bertrand fashion.…
As the FX markets continue to evolve, many institutions have started offering passive access to their internal liquidity pools. Market makers act as principal and have the opportunity to fill those orders as part of their risk management,…
It is usually assumed that stock prices reflect a balance between large numbers of small individual sellers and buyers. However, over the past fifty years mutual funds and other institutional shareholders have assumed an ever increasing…
The continuous-time version of Kyle's (1985) model is studied, in which market makers are not fiduciaries. They have some market power which they utilize to set the price to their advantage, resulting in positive expected profits. This has…
In a very simple stock market, made by only two \emph{initially equivalent} traders, we discuss how the information can affect the performance of the traders. More in detail, we first consider how the portfolios of the traders evolve in…
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…