Related papers: Statistical theory of the continuous double auctio…
Auctions are markets with strict regulations governing the information available to traders in the market and the possible actions they can take. Since well designed auctions achieve desirable economic outcomes, they have been widely used…
Statistical properties of order-driven double-auction markets with Bid-Ask spread are investigated through the dynamical quantities such as response function. We first attempt to utilize the so-called {\it Madhavan-Richardson-Roomans model}…
I construct a novel random double auction as a robust bilateral trading mechanism for a profit-maximizing intermediary who facilitates trade between a buyer and a seller. It works as follows. The intermediary publicly commits to charging a…
We develop a theory for the market impact of large trading orders, which we call metaorders because they are typically split into small pieces and executed incrementally. Market impact is empirically observed to be a concave function of…
We present results of numerical analysis of several simple models for the microstructure of a double auction market without intermediaries which were introduced in cond-mat/9808240. We perform computer simulations of the minimal model in…
We propose a model for price formation in financial markets based on clearing of a standard call auction with random orders, and verify its validity for prediction of the daily closing price distribution statistically. The model considers…
We use formal methods to specify, design, and monitor continuous double auctions, which are widely used to match buyers and sellers at exchanges of foreign currencies, stocks, and commodities. We identify three natural properties of such…
While auction theory views bids and valuations as continuous variables, real-world auctions are necessarily discrete. In this paper, we use a combination of analytical and computational methods to investigate whether incorporating…
Statistical properties of an order book and the effect they have on price dynamics were studied using the high-frequency NASDAQ Level II data. It was observed that the size distribution of marketable orders (transaction sizes) has power law…
In this paper, we revisit the common claim that double auctions necessarily generate competitive equilibria. We begin by observing that competitive equilibrium has some counterintuitive implications: specifically, it predicts that monotone…
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…
In this paper, we introduce a novel, non-recursive, maximal matching algorithm for double auctions, which aims to maximize the amount of commodities to be traded. It differs from the usual equilibrium matching, which clears a market at the…
We propose a dynamical theory of market liquidity that predicts that the average supply/demand profile is V-shaped and {\it vanishes} around the current price. This result is generic, and only relies on mild assumptions about the order flow…
We use standard physics techniques to model trading and price formation in a market under the assumption that order arrival and cancellations are Poisson random processes. This model makes testable predictions for the most basic properties…
We present an experimental and simulated model of a multi-agent stock market driven by a double auction order matching mechanism. Studying the effect of cumulative information on the performance of traders, we find a non monotonic…
A micro-scale model is proposed for the evolution of the limit order book. Within this model, the flows of orders (claims) are described by doubly stochastic Poisson processes taking account of the stochastic character of intensities of bid…
Auction data often contain information on only the most competitive bids as opposed to all bids. The usual measurement error approaches to unobserved heterogeneity are inapplicable due to dependence among order statistics. We bridge this…
This paper deals with a stochastic order-driven market model with waiting costs, for order books with heterogenous traders. Offer and demand of liquidity drives price formation and traders anticipate future evolutions of the order book. The…
A double auction game with an infinite number of buyers and sellers is introduced. All sellers posses one unit of a good, all buyers desire to buy one unit. Each seller and each buyer has a private valuation of the good. The distribution of…
Double auctions are widely used in financial markets, such as those for stocks, derivatives, currencies, and commodities, to match demand and supply. Once all buyers and sellers have placed their trade requests, the exchange determines how…