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.
Paper explores MM strategies that can refuse to quote or provide single-sided quotes.
The paper shows how to calculate risk-neutral default probabilities from bid and ask CDS quotes.
ARL and Hawkes processes improve market-making strategies with variable volatility.
Axiomatizes the bid-ask market maker's quoting rule
Proposes a framework to adjust quotes for informational risk in markets with informed traders and price-revealing quotes.
Optimal market making improves liquidity in prediction markets.
Modeling market makers' quoting strategies to understand price impact.
Study risk-sensitive market making with entropy regularization for better quote control.
The paper proposes a new algorithm for dealer markets that incorporates hedging and market impact.
The paper analyzes optimal dealer strategies in agent-based market models.
New models optimize quotes for automated market makers considering various price dynamics and demand variability.
We examine the Foreign Exchange (FX) spot price spreads with and without Last Look on the transaction. We assume that brokers are risk-neutral and they quote spreads so that losses to latency arbitrageurs (LAs) are recovered from other traders in the FX market. These losses are reduced if the broker can reject, ex-post…
The paper uses XAI to predict RFQ fulfillment accuracy.
We present a stochastic-local volatility model for derivative contracts on commodity futures able to describe forward-curve and smile dynamics with a fast calibration to liquid market quotes. A parsimonious parametrization is introduced to deal with the limited number of options quoted in the market. Cleared commodity …
This study examines non-retail trading on Polymarket, revealing unique behavior patterns and structural limitations.
We present a non-parametric method to estimate the discount curve from market quotes based on the Moore-Penrose pseudoinverse. The discount curve reproduces the market quotes perfectly, has maximal smoothness, and is given in closed-form. The method is easy to implement and requires only basic linear algebra operations…
A dealer manages quotes and rejection rules to control slippage risk in FX markets.
Market makers continuously set bid and ask quotes for the stocks they have under consideration. Hence they face a complex optimization problem in which their return, based on the bid-ask spread they quote and the frequency at which they indeed provide liquidity, is challenged by the price risk they bear due to their in…
For a long time interest-rate models were built on a single yield curve used both for discounting and forwarding. However, the crisis that has affected financial markets in the last years led market players to revise this assumption and accommodate basis-swap spreads, whose remarkable widening can no longer be neglecte…
The paper calibrates a model to market quotes efficiently and arbitrage-free.
Market-maker optimizes quotes based on strategic market-takers' behavior.
Power spectrum densities for the number of tick quotes per minute (market activity) on three currency markets (USD/JPY, EUR/USD, and JPY/EUR) for periods from January 1999 to December 2000 are analyzed. We find some peaks on the power spectrum densities at a few minutes. We develop the double-threshold agent model and …
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 market maker quotes the prices such that by taking the other side of the invest…
Model strategic interactions between market makers and traders to optimize execution.
Study uses SABR model to create implied volatilities from sparse quotes.
The definition of time is still an open question when one deals with high frequency time series. If time is simply the calendar time, prices can be modeled as continuous random processes and values resulting from transactions or given quotes are discrete samples of this underlying dynamics. On the contrary, if one take…
A large proportion of market making models derive from the seminal model of Avellaneda and Stoikov. The numerical approximation of the value function and the optimal quotes in these models remains a challenge when the number of assets is large. In this article, we propose closed-form approximations for the value functi…
For the last two decades, most financial markets have undergone an evolution toward electronification. The market for corporate bonds is one of the last major financial markets to follow this unavoidable path. Traditionally quote-driven i.e., dealer-driven) rather than order-driven, the market for corporate bonds is st…
A model-free framework extracts risk-neutral densities from short-dated options.
This study investigates that a characteristic time scale on an exchange rate market (USD/JPY) is examined for the period of 1998 to 2000. Calculating power spectrum densities for the number of tick quotes per minute and averaging them over the year yield that the mean power spectrum density has a peak at high frequenci…
New method calibrates crypto option prices more robustly.
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 market maker quotes the prices such that by taking the other side of the invest…
Modeling dealer competition, internalisation and externalisation impact market dynamics and costs.
Market makers provide liquidity to other market participants: they propose prices at which they stand ready to buy and sell a wide variety of assets. They face a complex optimization problem with both static and dynamic components. They need indeed to propose bid and offer/ask prices in an optimal way for making money …
Modeling option market making with hedging-induced price impact.
Dynamics of the major USA market indices DJIA, S&P, Nasdaq, and NYSE is analyzed from the point of view of the random walking problem with two-step correlations of the market moves. The parameters characterizing the stochastic dynamics are determined empirically from the historical quotes for the daily, weekly, and mon…
Two price regimes identified in limit order books: close and far from quotes.
PRZI traders adapt their quote-prices based on a strategy parameter s, affecting market dynamics.
In corporate bond markets, which are mainly OTC markets, market makers play a central role by providing bid and ask prices for a large number of bonds to asset managers from all around the globe. Determining the optimal bid and ask quotes that a market maker should set for a given universe of bonds is a complex task. U…
Model analyzes OTC market making with reputation feedback.
Model analyzes how reputation feedback affects OTC market making.
Financial exchanges provide incentives for limit order book (LOB) liquidity provision to certain market participants, termed designated market makers or designated sponsors. While quoting requirements typically enforce the activity of these participants for a certain portion of the day, we argue that liquidity demand t…
The paper models natural gas futures prices and volatility, using Monte Carlo and reinforcement learning.
VolNP learns IVS from sparse quotes via meta-learning and SABR priors.
Study optimal semi-static hedging for illiquid markets using dynamic cash and static quoted derivatives.
In this paper, we develop a Markovian model that deals with the volume offered at the best quote of an electronic order book. The volume of the first limit is a stochastic process whose paths are periodically interrupted and reset to a new value, either by a new limit order submitted inside the spread or by a market or…
We examine the dynamics of the bid and ask queues of a limit order book and their relationship with the intensity of trade arrivals. In particular, we study the probability of price movements and trade arrivals as a function of the quote imbalance at the top of the limit order book. We propose a stochastic model in an …
This paper uses RL to optimize bid-ask spreads for illiquid corporate bonds.