Related papers: Simple model of a limit order-driven market
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…
The call auction is a widely used trading mechanism, especially during the opening and closing periods of financial markets. In this paper, we study a standard call auction problem where orders are submitted according to Poisson processes,…
When modelling stock market dynamics, the price formation is often based on an equilbrium mechanism. In real stock exchanges, however, the price formation is goverend by the order book. It is thus interesting to check if the resulting…
The paper studies sub and super-replication price bounds for contingent claims defined on general trajectory based market models. No prior probabilistic or topological assumptions are placed on the trajectory space, trading is assumed to…
We propose a unified mean-field framework that bridges the dynamics of informal financial markets and formal markets governed by Limit Order Books (LOBs). Both settings are modeled as interacting particle systems on a 1D price lattice, with…
The prevention of rapidly and steeply falling market prices is vital to avoid financial crisis. To this end, some stock exchanges implement a price limit or a circuit breaker, and there has been intensive investigation into which regulation…
We consider the pricing of derivatives in a setting with trading restrictions, but without any probabilistic assumptions on the underlying model, in discrete and continuous time. In particular, we assume that European put or call options…
We introduce a deterministic dealer model which implements most of the empirical laws, such as fat tails in the price change distributions, long term memory of volatility and non-Poissonian intervals. We also clarify the causality between…
We build a methodology that takes a given option price in the tails with strike $K$ and extends (for calls, all strikes > $K$, for puts all strikes $< K$) assuming the continuation falls into what we define as "Karamata Constant" over which…
We propose a new model for the level I of a Limit Order Book (LOB), which incorporates the information about the standing orders at the opposite side of the book after each price change and the arrivals of new orders within the spread. Our…
We consider a market where a finite number of players trade an asset whose supply is a stochastic process. The price formation problem consists of finding a price process that ensures that when agents act optimally to minimize their trading…
The problem of market clearing is to set a price for an item such that quantity demanded equals quantity supplied. In this work, we cast the problem of predicting clearing prices into a learning framework and use the resulting models to…
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…
We propose a simple stochastic model of market behavior. Dividing market participants into two groups: trend-followers and fundamentalists, we derive the general form of a stochastic equation of market dynamics. The model has two…
We consider a broker who has to place a large order which consumes a sizable part of average daily trading volume. The broker's aim is thus to minimize execution costs he incurs from the adverse impact of his trades on market prices. By…
We study optimal liquidation strategies under partial information for a single asset within a finite time horizon. We propose a model tailored for high-frequency trading, capturing price formation driven solely by order flow through…
In economics, there are many ways to describe the interaction between a "seller" and a "buyer". The most common one, with which we interact almost every day, is selling for a fixed price. This option is perfect for selling a mass product,…
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 present a general framework for modelling the dynamics of limit order books, built on the combination of two modelling ingredients: the order flow, modelled as a general spatial point process, and market clearing, modelled via a…
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…