Related papers: Tobin tax and market depth
We study a financial model with a non-trivial price impact effect. In this model we consider the interaction of a large investor trading in an illiquid security, and a market maker who is quoting prices for this security. We assume that the…
In this paper, we consider the pricing and hedging of a financial derivative for an insider trader, in a model-independent setting. In particular, we suppose that the insider wants to act in a way which is independent of any modelling…
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 revisit two-field hybrid inflation as an effective field theory for low-scale inflation with sub-Planckian scalar field ranges. We focus on a prototype model by Stewart because it allows for a red spectral tilt, which still fits the…
In a market with one safe and one risky asset, an investor with a long horizon, constant investment opportunities, and constant relative risk aversion trades with small proportional transaction costs. We derive explicit formulas for the…
In financial applications, reinforcement learning (RL) agents are commonly trained on historical data, where their actions do not influence prices. However, during deployment, these agents trade in live markets where their own transactions…
We study stable allocations in an exchange economy with indivisible goods. The problem is well-known to be challenging, and rich enough to encode fundamentally unstable economies, such as the roommate problem. Our approach stems from…
We study the relaxation dynamics of the bid-ask spread and of the midprice after a sudden, large variation of the spread, corresponding to a temporary crisis of liquidity in a double auction financial market. We find that the spread decays…
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…
Markets have internal dynamics leading to excess volatility and other phenomena that are difficult to explain using rational expectations models. This paper studies these using a nonequilibrium price formation rule, developed in the context…
The available liquidity at any time in financial markets falls largely short of the typical size of the orders that institutional investors would trade. In order to reduce the impact on prices due to the execution of large orders, traders…
Deep Learning is evolving fast and integrates into various domains. Finance is a challenging field for deep learning, especially in the case of interpretable artificial intelligence (AI). Although classical approaches perform very well with…
The Bohmian quantum approach is implemented to analyze the financial markets. In this approach, there is a wave function that leads to a quantum potential. This potential can explain the relevance and entanglements of the agent's behaviors…
Nearly one-half of all trades in financial markets are executed by high-speed, autonomous computer programs -- a type of trading often called high-frequency trading (HFT). Although evidence suggests that HFT increases the efficiency of…
We prove the superhedging duality for a discrete-time financial market with proportional transaction costs under model uncertainty. Frictions are modeled through solvency cones as in the original model of [Kabanov, Y., Hedging and…
This paper introduces a novel robust trading paradigm, called \textit{multi-double linear policies}, situated within a \textit{generalized} lattice market. Distinctively, our framework departs from most existing robust trading strategies,…
We propose a price impact model where changes in prices are purely driven by the order flow in the market. The stochastic price impact of market orders and the arrival rates of limit and market orders are functions of the market liquidity…
A fundamental question about a market is under what conditions, and then how rapidly, does price signaling cause price equilibration. Qualitatively, this ought to depend on how well-connected the market is. We address this question…
We propose a non-linear observation-driven version of the Hasbrouck (1991) model for dynamically estimating trades' market impact and information content. We find that market impact displays an intraday pattern superimposed with large…
In this chapter, an input-output economic model with multiple interactive economic systems is considered. The model captures the multi-dimensional nature of the economic sectors or industries in each economic system, the interdependencies…