A locally-built, LLM-digested index of recent arXiv papers in quant finance, geometry/topology, and statistical ML — keyword search served straight from SQLite on this machine.
Method leverages bid/ask curves to improve price distribution forecasts.
A new relaxed framework for pricing illiquid derivatives using bid-ask spreads.
In this paper a finite discrete time market with an arbitrary state space and bid-ask spreads is considered. The notion of an equivalent bid-ask martingale measure (EBAMM) is introduced and the fundamental theorem of asset pricing is proved using (EBAMM) as an equivalent condition for no-arbitrage. The Cox-Ross-Rubinst…
Model predicts bid and ask price dynamics with spread-dependent intensities.
Quantum theory explains price dynamics in financial markets, capturing bid-ask spread and ergodicity.
Paper uses reinforcement learning to optimize bid-ask spreads in OTC markets.
We introduce, in continuous time, an axiomatic approach to assign to any financial position a dynamic ask (resp. bid) price process. Taking into account both transaction costs and liquidity risk this leads to the convexity (resp. concavity) of the ask (resp. bid) price. Time consistency is a crucial property for dynami…
Market opening affects bid-ask spread stability.
Microstructure of market dynamics is studied through analysis of tick price data. Linear trend is introduced as a tool for such analysis. Trend arbitrage inequality is developed and tested. The inequality sets limiting relationship between trend, bid-ask spread, market reaction and average update frequency of price inf…
Develops a model for bid and ask prices using stochastic control.
A new method calculates implied volatilities without using option prices.
In this paper we present a theoretical framework for determining dynamic ask and bid prices of derivatives using the theory of dynamic coherent acceptability indices in discrete time. We prove a version of the First Fundamental Theorem of Asset Pricing using the dynamic coherent risk measures. We introduce the dynamic …
In the domain of the so called Econophysics some attempts already have been made for applying the theory of Thermodynamics and Statistical Mechanics to economics and financial markets. In this paper a similar approach is made from a different perspective, trying to model the limit order book and price formation process…
The paper proposes estimators for bid-ask spreads with and without serial dependence.
A new model predicts bid-ask spread dynamics in financial markets.
The paper shows how to calculate risk-neutral default probabilities from bid and ask CDS quotes.
Kriging predicts futures prices by accounting for trends and bid-ask spreads.
The target of this paper is to establish the bid-ask pricing frame work for the American contingent claims against risky assets with G-asset price systems (see \cite{Chen2013b}) on the financial market under Knight uncertainty. First, we prove G-Dooby-Meyer decomposition for G-supermartingale. Furthermore, we consider …
We price weather-contingent options by use of Monte Carlo simulations. After calibrating the models to fit quoted prices, we analyze bid-ask spreads in terms of correlations across markets. Results are presented for a double-trigger Weather vs. Natural Gas call option.
We develop a theory of bid and ask price dynamics where the two prices form due to interaction of buy and sell orders. In this model the two prices are represented by eigenvalues of a 2x2 price operator corresponding to "bid" and "ask" eigenstates. Matrix elements of price operator fluctuate in time which results in ph…
Paper tackles market making in corporate bonds using deep reinforcement learning.
Unified models for asset prices with transaction costs and infinite variation strategies.
The target of this paper is to consider model the risky asset price on the financial market under the Knightian uncertainty, and pricing the ask and bid prices of the uncertain risk. We use the nonlinear analysis tool, i.e., G-frame work [26], to construct the model of the risky asset price and bid-ask pricing for the …
Exchange improves liquidity by using different bid and ask tick sizes.
In our empirical study, we examine the price of liquid stocks after experiencing a large intraday price change using data from the NYSE and the NASDAQ. We find significant reversal for both intraday price decreases and increases. The results are stable against varying parameters. While on the NYSE the large widening of…
Axiomatizes the bid-ask market maker's quoting rule
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} (MRR for short) to simulate the stochastic process of the price-change in empir…
We study time consistent dynamic pricing mechanisms of European contingent claims under uncertainty by using G framework introduced by Peng ([24]). We consider a financial market consisting of a riskless asset and a risky stock with price process modelled by a geometric generalized G-Brownian motion, which features the…
One popular approach to model the limit order books dynamics of the best bid and ask at level-1 is to use the reduced-form diffusion approximations. It is well known that the biggest contributing factor to the price movement is the imbalance of the best bid and ask. We investigate the data of the level-1 limit order bo…
Paper explores MM strategies that can refuse to quote or provide single-sided quotes.
A model-free framework extracts risk-neutral densities from short-dated options.
We derive a continuous time model for the joint evolution of the mid price and the bid-ask spread from a multiscale analysis of the whole limit order book (LOB) dynamics. We model the LOB as a multiclass queueing system and perform our asymptotic analysis using stylized features observed empirically. We argue that in t…
The statistical properties of the bid-ask spread of a frequently traded Chinese stock listed on the Shenzhen Stock Exchange are investigated using the limit-order book data. Three different definitions of spread are considered based on the time right before transactions, the time whenever the highest buying price or th…
Paper uses RL to optimize bid-ask spreads for diverse options.
We use high-frequency data of 1364 Chinese A-share stocks traded on the Shanghai Stock Exchange and Shenzhen Stock Exchange to investigate the intraday patterns in the bid-ask spreads. The daily periodicity in the spread time series is confirmed by Lomb analysis and the intraday bid-ask spreads are found to exhibit …
A limit order book provides information on available limit order prices and their volumes. Based on these quantities, we give an empirical result on the relationship between the bid-ask liquidity balance and trade sign and we show that liquidity balance on best bid/best ask is quite informative for predicting the futur…
Method determines asset prices in incomplete markets to optimize portfolios.
New method calibrates crypto option prices more robustly.
New findings on option pricing under bounded bid-ask spreads, showing minimal obstruction and explicit operator.
Market makers minimize regret by strategically setting bid and ask prices.
We consider rate swaps which pay a fixed rate against a floating rate in presence of bid-ask spread costs. Even for simple models of bid-ask spread costs, there is no explicit strategy optimizing an expected function of the hedging error. We here propose an efficient algorithm based on the stochastic gradient method to…
The paper introduces a new price model based on entropy that better fits high-frequency market data.
In this paper, the optimal pricing strategy in Avellande-Stoikov's for a monopolistic dealer is extended to a general situation where multiple dealers are present in a competitive market. The dealers' trading intensities, their optimal bid and ask prices and therefore their spreads are derived when the dealers are info…
This paper uses HCR to predict bid-ask spreads from accessible data.
Study optimal semi-static hedging for illiquid markets using dynamic cash and static quoted derivatives.
Study models arrival rates and cancellation rates of limit orders in Borsa Istanbul.
Motivated by the literature on investment flows and optimal trading, we examine intraday predictability in the cross-section of stock returns. We find a striking pattern of return continuation at half-hour intervals that are exact multiples of a trading day, and this effect lasts for at least 40 trading days. Volume, o…
We show that the cost of market orders and the profit of infinitesimal market-making or -taking strategies can be expressed in terms of directly observable quantities, namely the spread and the lag-dependent impact function. Imposing that any market taking or liquidity providing strategies is at best marginally profita…