Corpus ID: 235421965

Algorithmic market making in foreign exchange cash markets: a new model for active market makers

  title={Algorithmic market making in foreign exchange cash markets: a new model for active market makers},
  author={A. Barzykin and Philippe Bergault and Olivier Gu'eant},
In OTC markets, one of the main tasks of dealers / market makers consists in providing prices at which they agree to buy and sell the assets and securities they have in their scope. With ever increasing trading volume, this quoting task has to be done algorithmically. Over the last ten years, many market making models have been designed that can be the basis of quoting algorithms in OTC markets. However, in the academic literature, most market making models adapted to OTC markets are general… Expand

Figures from this paper


Optimal market making
ABSTRACT Market makers provide liquidity to other market participants: they propose prices at which they stand ready to buy and sell a wide variety of assets. They face a complex optimization problemExpand
The Financial Mathematics of Market Liquidity : From Optimal Execution to Market Making
This book is among the first to present the mathematical models most commonly used to solve optimal execution problems and market making problems in finance. The Financial Mathematics of MarketExpand
New closed-form approximations in multi-asset market making
The job of market makers is to provide liquidity to other market participants. The main source of risk for market makers is holding inventory and the uncertainty of future price variation. In manyExpand
Foreign exchange markets with Last Look
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 latencyExpand
Dealership market: Market-making with inventory
Abstract This study considers the problem of a price-setting monopolistic market-maker in a dealership market where the stochastic demand and supply are depicted by price-dependent Poisson processesExpand
Dealing with the inventory risk: a solution to the market making problem
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 theyExpand
Deep Reinforcement Learning for Market Making in Corporate Bonds: Beating the Curse of Dimensionality
A discrete-time method inspired by reinforcement learning techniques, namely, a model-based deep actor-critic algorithm for approximating the optimal bid and ask quotes over a large universe of bonds in a model à la Avellaneda–Stoikov. Expand
Market Making with Stochastic Liquidity Demand: Simultaneous Order Arrival and Price Change Forecasts
We provide an explicit characterization of the optimal market making strategy in a discretetime Limit Order Book (LOB). In our model, the number of filled orders during each period depends linearlyExpand
The Dynamics of Dealer Markets Under Competition
The behavior of competing dealers in securities markets is analyzed. Securities are characterized by stochastic returns and stochastic transactions. Reservation bid and ask prices of dealers areExpand
Information Effects on the Bid‐Ask Spread
An individual who chooses to serve as a market-maker is assumed to optimize his position by setting a bid-ask spread which maximizes the difference between expected revenues received fromExpand