تقرير
Adaptive Optimal Market Making Strategies with Inventory Liquidation Cos
| العنوان: | Adaptive Optimal Market Making Strategies with Inventory Liquidation Cos |
|---|---|
| المؤلفون: | Chávez-Casillas, Jonathan, Figueroa-López, José E., Yu, Chuyi, Zhang, Yi |
| سنة النشر: | 2024 |
| المجموعة: | Quantitative Finance |
| مصطلحات موضوعية: | Quantitative Finance - Trading and Market Microstructure |
| الوصف: | A novel high-frequency market-making approach in discrete time is proposed that admits closed-form solutions. By taking advantage of demand functions that are linear in the quoted bid and ask spreads with random coefficients, we model the variability of the partial filling of limit orders posted in a limit order book (LOB). As a result, we uncover new patterns as to how the demand's randomness affects the optimal placement strategy. We also allow the price process to follow general dynamics without any Brownian or martingale assumption as is commonly adopted in the literature. The most important feature of our optimal placement strategy is that it can react or adapt to the behavior of market orders online. Using LOB data, we train our model and reproduce the anticipated final profit and loss of the optimal strategy on a given testing date using the actual flow of orders in the LOB. Our adaptive optimal strategies outperform the non-adaptive strategy and those that quote limit orders at a fixed distance from the midprice. Comment: A preprint of this paper was distributed under the title of "Market Making with Stochastic Liquidity Demand: Simultaneous Order Arrival and Price Change Forecasts". The present paper extends the results in the referred preprint, which will remain as an unpublished manuscript |
| نوع الوثيقة: | Working Paper |
| URL الوصول: | http://arxiv.org/abs/2405.11444 |
| رقم الأكسشن: | edsarx.2405.11444 |
| قاعدة البيانات: | arXiv |
| الوصف غير متاح. |