Related papers: Statistical theory of the continuous double auctio…
Standard models in economics stress the role of intelligent agents who maximize utility. However, there may be situations where, for some purposes, constraints imposed by market institutions dominate intelligent agent behavior. We use data…
In the present work we introduce a novel multi-agent model with the aim to reproduce the dynamics of a double auction market at microscopic time scale through a faithful simulation of the matching mechanics in the limit order book. The…
We introduce and treat rigorously a new multi-agent model of the continuous double auction or in other words the order book (OB). It is designed to explain collective behaviour of the market when new information affecting the market…
Digital marketplaces processing billions of dollars annually represent critical infrastructure in sociotechnical ecosystems, yet their performance optimization lacks principled measurement frameworks that can inform algorithmic governance…
We develop a behavioral model for liquidity and volatility based on empirical regularities in trading order flow in the London Stock Exchange. This can be viewed as a very simple agent based model in which all components of the model are…
Motivated by applications such as stock exchanges and spectrum auctions, there is a growing interest in mechanisms for arranging trade in two-sided markets. Existing mechanisms are either not truthful, or do not guarantee an…
The ultimate value of theories of the fundamental mechanisms comprising the asset price in financial systems will be reflected in the capacity of such theories to understand these systems. Although the models that explain the various states…
Online double auctions (DAs) model a dynamic two-sided matching problem with private information and self-interest, and are relevant for dynamic resource and task allocation problems. We present a general method to design truthful DAs, such…
In the paper, a statistical procedure for estimating the parameters of zero intelligence models by means of tick-by-tick quote (L1) data is proposed. A large class of existing zero intelligence models is reviewed. It is shown that all those…
We propose a series of simple models for the microstructure of a double auction market without intermediaries. We specialize to those markets, such interdealer broker markets, which are dominated by professional traders, who trade mainly…
In this study, we present a simple stochastic order-book model for investors' swarm behaviors seen in the continuous double auction mechanism, which is employed by major global exchanges. Our study shows a characteristic called "fat tail"…
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…
Exploiting a precise reproduction of a stock exchange, the robustness of the Continuous Double Auction (CDA) mechanism, evaluated by means of the waiting time distributions, has been proved versus 36 different set ups made by varying both…
We study the robust double auction mechanisms, that is, the double auction mechanisms that satisfy dominant strategy incentive compatibility, ex-post individual rationality and ex-post budget balance. We first establish that the price in…
Devising models of the limit order book that realistically reproduce the market response to exogenous trades is extremely challenging and fundamental in order to test trading strategies. We propose a novel explainable model for small tick…
Real world markets display power-law features in variables such as price fluctuations in stocks. To further understand market behavior, we have conducted a series of market experiments on our web-based prediction market platform which…
We study a phenomenological model for the continuous double auction, equivalent to two independent $M/M/1$ queues. The continuous double auction defines a continuous-time random walk for trade prices. The conditions for ergodicity of the…
Market-based mechanisms such as auctions are being studied as an appropriate means for resource allocation in distributed and mulitagent decision problems. When agents value resources in combination rather than in isolation, they must often…
We analyze the stability properties of equilibrium solutions and periodicity of orbits in a two-dimensional dynamical system whose orbits mimic the evolution of the price of an asset and the excess demand for that asset. The construction of…
Mechanism design, a branch of economics, aims to design rules that can autonomously achieve desired outcomes in resource allocation and public decision making. The research on mechanism design using machine learning is called automated…