Markov Equilibrium between High Frequency Traders

0433571 - ÚTIA 2015 RIV CZ eng C - Conference Paper (international conference)
Šmíd, Martin
Markov Equilibrium between High Frequency Traders.
International Scientific Conference Managing and Modelling of Financial Risks. Ostrava: VSB-TU Ostrava, 2014 - (Šmíd, M.), s. 781-786. ISBN 978-80-248-3631-7.
[International Scientific Conference Managing and Modelling of Financial Risks 2014 /7./. Ostrava (CZ), 08.09.2014-09.09.2014]
R&D Projects: GA ČR(CZ) GBP402/12/G097
Grant - others:European Social Fund(CZ) CZ.1.07/2.3.00/20.0296
Program: EE - Operační program Vzdělávání pro konkurenceschopnost (2007-2015)
Institutional support: RVO:67985556
Keywords : limit order market * Markov property * optimal trading
Subject RIV: BB - Applied Statistics, Operational Research
http://library.utia.cas.cz/separaty/2014/E/smid-0433571.pdf

We model an optimal behaviour of a finite number of (perhaps high frequency) traders at a limit order market with a instrument possibly paying dividends. The traders are assumed to trade continuously and to maximize their discounted consumption while keeping the probability of near-bankruptcy states at a prescribed level. The latency times, ie., the delays between the order submissions and the corresponding order books' changes, are taken into account. We show that the process describing the market is Markov given the largest among information sets of the agents.
Permanent Link: http://hdl.handle.net/11104/0237773