arXiv research

This paper develops a method to select a reference contract for multi-contract quoting to minimize execution risk.

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.

Axiomatizes the bid-ask market maker's quoting rule

Study risk-sensitive market making with entropy regularization for better quote control.

Proposes a framework to adjust quotes for informational risk in markets with informed traders and price-revealing quotes.

Unified theory for optimal execution through signal-adaptive quotes in limit order books.

ARL and Hawkes processes improve market-making strategies with variable volatility.

The paper calibrates a model to market quotes efficiently and arbitrage-free.

A dealer manages quotes and rejection rules to control slippage risk in FX markets.

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…

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…

New models optimize quotes for automated market makers considering various price dynamics and demand variability.

Two price regimes identified in limit order books: close and far from quotes.

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…

We study the natural Kähler metrics on moduli spaces of stable oriented pairs in a very general framework, and we prove a universal formula expressing the Kähler class of such a moduli space in terms of characteristic classes of the universal bundle. We use these results to compute explicitly the volumina of certain Qu…

The paper analyzes optimal dealer strategies in agent-based market models.

This paper develops a model of liquidity provision in financial markets by adapting the Madhavan, Richardson, and Roomans (1997) price formation model to realistic order books with quote discretization and liquidity rebates. We postulate that liquidity providers observe a fundamental price which is continuous, efficien…

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…

The paper uses XAI to predict RFQ fulfillment accuracy.

Study Nash competition among dealers quoting prices to clients with unknown trading motives.

Optimal market making improves liquidity in prediction markets.

ClauseLens uses reinforcement learning to price reinsurance treaties transparently and auditably.

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…

Modeling market makers' quoting strategies to understand price impact.

VolNP learns IVS from sparse quotes via meta-learning and SABR priors.

This study examines non-retail trading on Polymarket, revealing unique behavior patterns and structural limitations.

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…

A model-free framework extracts risk-neutral densities from short-dated options.

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…

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 …

Non-spanning identification of scheduled event risk in option pricing.

Let $X$ be a compact connected Riemann surface of genus $g$, with $g \geq 2$, and let ${\mathcal O}_X$ denote the sheaf of holomorphic functions on $X$. Fix positive integers $r$ and $d$ and let ${\mathcal Q}(r,d)$ be the Quot scheme parametrizing all torsion coherent quotients of ${\mathcal O}^{\oplus r}_X$ of degree …

Paper generalizes balanced metrics existence to singular cases using Quot-scheme limit.

The paper proposes a new algorithm for dealer markets that incorporates hedging and market impact.

For a holomorphic vector bundle $E$ over a polarised Kähler manifold, we establish a direct link between the slope stability of $E$ and the asymptotic behaviour of Donaldson's functional, by defining the Quot-scheme limit of Fubini-Study metrics. In particular, we provide an explicit estimate which proves that Donaldso…

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…

In this paper, we propose a new method for estimating the conditional risk-neutral density (RND) directly from a cross-section of put option bid-ask quotes. More precisely, we propose to view the RND recovery problem as an inverse problem. We first show that it is possible to define restricted put and call operators th…

New method calibrates crypto option prices more robustly.

This is a sequel of our paper [arXiv:1809.08425] on the Quot-scheme limit and variational properties of Donaldson's functional, which established its coercivity for slope stable holomorphic vector bundles over smooth projective varieties. Assuming that the coercivity is uniform in a certain sense, we provide a new proo…

Credit Default Swaps (CDS) on a reference entity may be traded in multiple currencies, in that protection upon default may be offered either in the domestic currency where the entity resides, or in a more liquid and global foreign currency. In this situation currency fluctuations clearly introduce a source of risk on C…

Proposes a method to fill in missing swaption volatility data using variational autoencoders.

Let $X$ be a compact connected Riemann surface of genus at least two, and let ${\mathcal Q}_X(r,d)$ be the quot scheme that parametrizes all the torsion coherent quotients of ${\mathcal O}^{\oplus r}_X$ of degree $d$. This ${\mathcal Q}_X(r,d)$ is also a moduli space of vortices on $X$. Its geometric properties have be…

In commodity and energy markets swing options allow the buyer to hedge against futures price fluctuations and to select its preferred delivery strategy within daily or periodic constraints, possibly fixed by observing quoted futures contracts. In this paper we focus on the natural gas market and we present a dynamical …

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 …

PRZI traders adapt their quote-prices based on a strategy parameter s, affecting market dynamics.

The method constructs arbitrage-free option surfaces from noisy quotes using Chebyshev bases and a fog post-fit layer.