2,642 research outputs found
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Optimal Trading Strategies in a Limit Order Market with Imperfect Liquidity
We study the optimal execution strategy of selling a security. In a continuous time diffusion framework, a risk-averse trader faces the choice of selling the security promptly or placing a limit order and hence delaying the transaction in order to sell at a more favorable price. We introduce a random delay parameter, which defers limit order execution and characterizes market liquidity. The distribution of expected time-to-fill of limit orders conforms to the empirically observed exponential distribution of trading times, and its variance decreases with liquidity. We obtain a closed-form solution and demonstrate that the presence of the lag factor linearizes the impact of other market parameters on the optimal limit price. Finally, two more stylized facts are rationalized in our model: the equilibrium bid-ask spread decreases with liquidity, but increases with agents risk aversion
On Heteropolymer Shape Dynamics
We investigate the time evolution of the heteropolymer model introduced by
Iori, Marinari and Parisi to describe some of the features of protein folding
mechanisms. We study how the (folded) shape of the chain evolves in time. We
find that for short times the mean square distance (squared) between chain
configurations evolves according to a power law, . We discuss
the influence of the quenched disorder (represented by the randomness of the
coupling constants in the Lennard-Jones potential) on value of the critical
exponent. We find that decreases from to when
the strength of the quenched disorder increases.Comment: 12 pages, very simple LaTeX file, 6 figures not included, sorry. SCCS
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The Impact of Reduced Pre-Trade Transparency Regimes on Market Quality
This paper studies the effects of pre-trade quote transparency on spread, price discovery and liquidity in an artificial limit order market with heterogeneous trading rules. Our agent-based numerical experiments suggest that full quote transparency incurs substantial transaction costs to traders and dampens trading activity in an order-driven market. Our finding reveals that exogenous restriction of displayed depth, up to several best quotes, does not benefit market performance. On the contrary, endogenous restriction of displayed quote depth, by means of iceberg orders, improves market quality in multiple dimensions: it reduces average transaction costs, maintains higher liquidity and moderate volatility, balances the limit order book, and enhances price discovery
The Apparent Madness of Crowds: Irrational collective behavior emerging from interactions among rational agents
Standard economic theory assumes that agents in markets behave rationally.
However, the observation of extremely large fluctuations in the price of
financial assets that are not correlated to changes in their fundamental value,
as well as the extreme instance of financial bubbles and crashes, imply that
markets (at least occasionally) do display irrational behavior. In this paper,
we briefly outline our recent work demonstrating that a market with interacting
agents having bounded rationality can display price fluctuations that are {\em
quantitatively} similar to those seen in real markets.Comment: 4 pages, 1 figure, to appear in Proceedings of International Workshop
on "Econophysics of Stock Markets and Minority Games" (Econophys-Kolkata II),
Feb 14-17, 200
A fitness model for the Italian Interbank Money Market
We use the theory of complex networks in order to quantitatively characterize
the formation of communities in a particular financial market. The system is
composed by different banks exchanging on a daily basis loans and debts of
liquidity. Through topological analysis and by means of a model of network
growth we can determine the formation of different group of banks characterized
by different business strategy. The model based on Pareto's Law makes no use of
growth or preferential attachment and it reproduces correctly all the various
statistical properties of the system. We believe that this network modeling of
the market could be an efficient way to evaluate the impact of different
policies in the market of liquidity.Comment: 5 pages 5 figure
Mathematical formulations for scheduling jobs on identical parallel machines with family setup times and total weighted completion time minimization
This paper addresses the parallel machine scheduling problem with family dependent setup times and total weighted completion time minimization. In this problem, when two jobs j and k are scheduled consecutively on the same machine, a setup time is performed between the finishing time of j and the starting time of k if and only if j and k belong to different families. The problem is strongly NP-hard and is commonly addressed in the literature by heuristic approaches and by branch-and-bound algorithms. Achieving proven optimal solution is a challenging task even for small size instances. Our contribution is to introduce five novel mixed integer linear programs based on concepts derived from one-commodity, arc-flow and set covering formulations. Numerical experiments on more than 13000 benchmark instances show that one of the arc-flow models and the set covering model are quite efficient, as they provide on average better solutions than state-of-the-art approaches, with shorter computation times, and solve to proven optimality a large number of open instances from the literature
A quantitative model of trading and price formation in financial markets
We use standard physics techniques to model trading and price formation in a
market under the assumption that order arrival and cancellations are Poisson
random processes. This model makes testable predictions for the most basic
properties of a market, such as the diffusion rate of prices, which is the
standard measure of financial risk, and the spread and price impact functions,
which are the main determinants of transaction cost. Guided by dimensional
analysis, simulation, and mean field theory, we find scaling relations in terms
of order flow rates. We show that even under completely random order flow the
need to store supply and demand to facilitate trading induces anomalous
diffusion and temporal structure in prices.Comment: 5 pages, 4 figure
A heuristic algorithm for a single vehicle static bike sharing rebalancing problem
The static bike rebalancing problem (SBRP) concerns the task of repositioning bikes among stations in self-service bike-sharing systems. This problem can be seen as a variant of the one-commodity pickup and delivery vehicle routing problem, where multiple visits are allowed to be performed at each station, i.e., the demand of a station is allowed to be split. Moreover, a vehicle may temporarily drop its load at a station, leaving it in excess or, alternatively, collect more bikes from a station (even all of them), thus leaving it in default. Both cases require further visits in order to meet the actual demands of such station. This paper deals with a particular case of the SBRP, in which only a single vehicle is available and the objective is to find a least-cost route that meets the demand of all stations and does not violate the minimum (zero) and maximum (vehicle capacity) load limits along the tour. Therefore, the number of bikes to be collected or delivered at each station must be appropriately determined in order to respect such constraints. We propose an iterated local search (ILS) based heuristic to solve the problem. The ILS algorithm was tested on 980 benchmark instances from the literature and the results obtained are competitive when compared to other existing methods. Moreover, our heuristic was capable of finding most of the known optimal solutions and also of improving the results on a number of open instances
Hamiltonian dynamics of homopolymer chain models
The Hamiltonian dynamics of chains of nonlinearly coupled particles is
numerically investigated in two and three dimensions. Simple, off-lattice
homopolymer models are used to represent the interparticle potentials. Time
averages of observables numerically computed along dynamical trajectories are
found to reproduce results given by the statistical mechanics of homopolymer
models. The dynamical treatment, however, indicates a nontrivial transition
between regimes of slow and fast phase space mixing. Such a transition is
inaccessible to a statistical mechanical treatment and reflects a bimodality in
the relaxation of time averages to corresponding ensemble averages. It is also
found that a change in the energy dependence of the largest Lyapunov exponent
indicates the theta-transition between filamentary and globular polymer
configurations, clearly detecting the transition even for a finite number of
particles.Comment: 11 pages, 8 figures, accepted for publication in Physical Review
Delineation of the Native Basin in Continuum Models of Proteins
We propose two approaches for determining the native basins in off-lattice
models of proteins. The first of them is based on exploring the saddle points
on selected trajectories emerging from the native state. In the second
approach, the basin size can be determined by monitoring random distortions in
the shape of the protein around the native state. Both techniques yield the
similar results. As a byproduct, a simple method to determine the folding
temperature is obtained.Comment: REVTeX, 6 pages, 5 EPS figure
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