Institute of Information Theory and Automation

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Publication details

Markov Equilibrium between High Frequency Traders

Conference Paper (international conference)

Šmíd Martin


serial: International Scientific Conference Managing and Modelling of Financial Risks, p. 781-786 , Eds: Šmíd Martin

action: International Scientific Conference Managing and Modelling of Financial Risks 2014 /7./, (Ostrava, CZ, 08.09.2014-09.09.2014)

project(s): GBP402/12/G097, GA ČR, CZ.1.07/2.3.00/20.0296, European Social Fund

keywords: limit order market, Markov property, optimal trading

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abstract (eng):

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.

RIV: BB

2012-12-21 16:10