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The partition of society into groups, polarization, and social networks are part of most conversations today. How do they influence price competition? We discuss Bertrand duopoly equilibria with demand subject to network effects. Contrary…
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…
A standing assumption in the literature on proportional transaction costs is efficient friction. Together with robust no free lunch with vanishing risk, it rules out strategies of infinite variation, as they usually appear in frictionless…
We consider portfolio selection under nonparametric $\alpha$-maxmin ambiguity in the neighbourhood of a reference distribution. We show strict concavity of the portfolio problem under ambiguity aversion. Implied demand functions are…
This paper considers utility indifference valuation of derivatives under model uncertainty and trading constraints, where the utility is formulated as an additive stochastic differential utility of both intertemporal consumption and…
Economic models with input-output networks assume that firm or sector (unit) growth is driven by a weighted sum of trade partners' growth and an independently-drawn idiosyncratic shock. I show that the idiosyncratic risk assumption in a…
We propose a general framework to describe the impact of different events in the order book, that generalizes previous work on the impact of market orders. Two different modeling routes can be considered, which are equivalent when only…
This paper is devoted to the important yet unexplored subject of crowding effects on market impact, that we call "co-impact". Our analysis is based on a large database of metaorders by institutional investors in the U.S. equity market. We…
In this paper, we assume that the permanent market impact of metaorders is linear and that the price is a martingale. Those two hypotheses enable us to derive the evolution of the price from the dynamics of the flow of market orders. For…
We study the behavior of simple models for financial markets with widely spread frequency either in the trading activity of agents or in the occurrence of basic events. The generic picture of a phase transition between information efficient…
We develop a new identification strategy for demand estimation when cost shifters may not be available and there are substantial variations in demand over time. This approaches relies on a kind of nonlinear difference-in-differences, in…
The paper proposes a framework for modeling and analysis of the dynamics of supply, demand, and clearing prices in power system with real-time retail pricing and information asymmetry. Real-time retail pricing is characterized by passing on…
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…
In this article we revisit the classic problem of tatonnement in price formation from a microstructure point of view, reviewing a recent body of theoretical and empirical work explaining how fluctuations in supply and demand are slowly…
We attempt to reconcile Gabaix and Koijen's (GK) recent Inelastic Market Hypothesis (IMH) with the order-driven view of markets that emerged within the microstructure literature in the past 20 years. We review the most salient empirical…
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…
Many commonly used liquidity measures are based on snapshots of the state of the limit order book (LOB) and can thus only provide information about instantaneous liquidity, and not regarding the local liquidity regime. However, trading in…
Using simple particle models of limit order markets, we argue that mid-term over-diffusive price behaviour is inherent to the very nature of these markets. Several rules for rate changes are considered. We obtain analytical results for…
Conventional models of matching markets assume that monetary transfers can clear markets by compensating for utility differentials. However, empirical patterns show that such transfers often fail to close structural preference gaps. This…
If prices of assets traded in a financial market are determined by non-linear pricing rules, different versions of the Call-Put Parity have been considered. We show that, under monotonicity, parities between call and put options and…