25,779 research outputs found
Chain: A Dynamic Double Auction Framework for Matching Patient Agents
In this paper we present and evaluate a general framework for the design of
truthful auctions for matching agents in a dynamic, two-sided market. A single
commodity, such as a resource or a task, is bought and sold by multiple buyers
and sellers that arrive and depart over time. Our algorithm, Chain, provides
the first framework that allows a truthful dynamic double auction (DA) to be
constructed from a truthful, single-period (i.e. static) double-auction rule.
The pricing and matching method of the Chain construction is unique amongst
dynamic-auction rules that adopt the same building block. We examine
experimentally the allocative efficiency of Chain when instantiated on various
single-period rules, including the canonical McAfee double-auction rule. For a
baseline we also consider non-truthful double auctions populated with
zero-intelligence plus"-style learning agents. Chain-based auctions perform
well in comparison with other schemes, especially as arrival intensity falls
and agent valuations become more volatile
An Integrated Market for Electricity and Natural Gas Systems with Stochastic Power Producers
In energy systems with high shares of weather-driven renewable power sources,
gas-fired power plants can serve as a back-up technology to ensure security of
supply and provide short-term flexibility. Therefore, a tighter coordination
between electricity and natural gas networks is foreseen. In this work, we
examine different levels of coordination in terms of system integration and
time coupling of trading floors. We propose an integrated operational model for
electricity and natural gas systems under uncertain power supply by applying
two-stage stochastic programming. This formulation co-optimizes day-ahead and
real-time dispatch of both energy systems and aims at minimizing the total
expected cost. Additionally, two deterministic models, one of an integrated
energy system and one that treats the two systems independently, are presented.
We utilize a formulation that considers the linepack of the natural gas system,
while it results in a tractable mixed-integer linear programming (MILP) model.
Our analysis demonstrates the effectiveness of the proposed model in
accommodating high shares of renewables and the importance of proper natural
gas system modeling in short-term operations to reveal valuable flexibility of
the natural gas system. Moreover, we identify the coordination parameters
between the two markets and show their impact on the system's operation and
dispatch
Equilibrium Returns with Transaction Costs
We study how trading costs are reflected in equilibrium returns. To this end,
we develop a tractable continuous-time risk-sharing model, where heterogeneous
mean-variance investors trade subject to a quadratic transaction cost. The
corresponding equilibrium is characterized as the unique solution of a system
of coupled but linear forward-backward stochastic differential equations.
Explicit solutions are obtained in a number of concrete settings. The
sluggishness of the frictional portfolios makes the corresponding equilibrium
returns mean-reverting. Compared to the frictionless case, expected returns are
higher if the more risk-averse agents are net sellers or if the asset supply
expands over time.Comment: Finance and Stochastics, Springer Verlag (Germany), In pres
Equilibrium Asset Pricing with Transaction Costs
We study risk-sharing economies where heterogenous agents trade subject to
quadratic transaction costs. The corresponding equilibrium asset prices and
trading strategies are characterised by a system of nonlinear, fully-coupled
forward-backward stochastic differential equations. We show that a unique
solution generally exists provided that the agents' preferences are
sufficiently similar. In a benchmark specification with linear state dynamics,
the illiquidity discounts and liquidity premia observed empirically correspond
to a positive relationship between transaction costs and volatility.Comment: 32 pages, forthcoming in 'Finance and Stochastics
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