scholarly journals Mini-Flash Crashes, Model Risk, and Optimal Execution

2018 ◽  
Vol 04 (01n02) ◽  
pp. 1850010 ◽  
Author(s):  
Erhan Bayraktar ◽  
Alexander Munk
Keyword(s):  
Mathematical Model ◽  
Trading Volume ◽  
Feedback Loops ◽  
Model Risk ◽  
Human Errors ◽  
Partial Synchronization ◽  
Market Participants ◽  
Liquidity Provision ◽  
Optimal Execution ◽  
Equilibrium Approach

Oft-cited causes of mini-flash crashes include human errors, endogenous feedback loops and the nature of modern liquidity provision. We develop a mathematical model which captures aspects of these explanations. Empirical features of recent mini-flash crashes are present in our framework. For example, there are periods when no such events will occur. If they do, even just before their onset, market participants may not know with certainty that a disruption will unfold. Our mini-flash crashes can materialize in both low and high trading volume environments and may be accompanied by a partial synchronization in order submission. Instead of adopting a classically-inspired equilibrium approach, we borrow ideas from the optimal execution literature. Each of our agents begins with beliefs about how his own trades impact prices and how prices would move in his absence. They, along with other market participants, then submit orders which are executed at a common venue. Naturally, this leads us to explicitly distinguish between how prices actually evolve and our agents’ opinions. In particular, every agent’s beliefs will be expressly incorrect.

scholarly journals Cross-Sectional Variation of Intraday Liquidity, Cross-Impact, and Their Effect on Portfolio Execution

2022 ◽  
Author(s):  
Seungki Min ◽  
Costis Maglaras ◽  
Ciamac C. Moallemi
Keyword(s):  
Empirical Analysis ◽  
Significant Rise ◽  
Cross Sectional ◽  
Execution Costs ◽  
Market Participants ◽  
Liquidity Provision ◽  
The Past ◽  
Optimal Execution ◽  
Intraday Liquidity ◽  
Naive Approach

Over the past decade, there has been a significant rise in assets managed under passive and systematic strategies. Such strategies hold and trade portfolios in a coordinated manner, often concentrating trading around the end of the trading session. Simultaneously, there has been a rise in activity from market participants that act as liquidity providers, themselves trading along portfolio directions. In “Cross-Sectional Variation of Intraday Liquidity, cross-impact, and Their Effect on Portfolio Execution,” Min, Maglaras, and Moallemi investigate the implications of these two observations, specifically exploring how the phenomenon of portfolio liquidity provision leads to cross-security impact and influences the optimal execution schedules of risk-neutral traders that seek to minimize their expected execution costs. They show that the optimized schedules deviate from the naïve approach that trades each security separately and instead, couple the trading intensity across stocks so as to benefit from the liquidity provided along attractive portfolio trading directions. Empirical analysis demonstrates that coupled optimized schedules could lower costs by as much as 15% relative to the naïve approach.

scholarly journals Asymmetric Responses to Earnings News: A Case for Ambiguity

2014 ◽  
Vol 90 (2) ◽  
pp. 785-817 ◽  
Author(s):  
Christopher D. Williams
Keyword(s):  
Empirical Evidence ◽  
Trading Volume ◽  
Ambiguity Aversion ◽  
Institutional Ownership ◽  
Bad News ◽  
Equal Weight ◽  
Information Uncertainty ◽  
Market Participants ◽  
Asymmetric Responses

ABSTRACT This study empirically examines the role of shocks to macro-uncertainty in shaping the responses of stock market participants to firm-specific earnings news. Specifically, I find that investors place greater weight on bad news following an increase in macro-uncertainty. By contrast, I find that investors place equal weight on both good and bad news following a decrease in macro-uncertainty. Furthermore, my findings show that these effects are more pronounced (1) for firms whose prior returns are more correlated with macro-uncertainty, (2) for firms that experience abnormally low trading volume during the earnings announcement, (3) for firms with relatively lower levels of institutional ownership, and (4) for firms with relatively higher information uncertainty. In sum, these findings provide novel empirical evidence that investors behave in a manner consistent with ambiguity aversion, with the effects strongest among unsophisticated investors.

scholarly journals USE OF PRICE MARKETING IN EXHIBITION ACTIVITIES

Management ◽  
2020 ◽  
Vol 31 (1) ◽  
pp. 57-66
Author(s):  
Nina A. Krakhmalova
Keyword(s):  
Mathematical Model ◽  
Market Price ◽  
Marketing Research ◽  
Research Field ◽  
Field Surveys ◽  
Market Participants ◽  
Marketing Model ◽  
Economic Reality ◽  
Analysis System ◽  
Exhibition Service

Introduction. The use of methodical tools of pricing in the marketing of exhibition activity by the companies-organizers of exhibition events allows to strengthen their competitive positions in the internal and external markets of exhibition services, to improve the financial results of their activities.The research hypothesis. When improving the methodological tools of pricing in the marketing of exhibition activities, it is advisable to use the concept of extremely high, preventing the formation of demand, the price, which the author called the "price of alternative".The purpose of this article is to offer methodological tools of marketing pricing in the field of expo business and to substantiate the economic and mathematical model of the optimal market price of the exhibition area.The methodology of the study: methods of observation and collection of facts, statistical, content analysis, comparative and functional analysis, system approach based on modeling of economic reality, tabular, graphic, specific methods of marketing research: field (surveys of exhibition organizers, participants of expositions) and desk research.Results. The four-level marketing model of the exhibition service as a set of various interrelated attributes and benefits expressing the usefulness of the considered expo service for the participants of the exhibition event was developed. The use of the developed model allows exhibition organizers to form marketing relations with all market participants in the best possible way, to position the company taking into account consumers' expectations, and to differentiate expo-services suppliers taking into account their quality characteristics.Conclusions. The use of the "price of alternative" allows the company organizer of the exhibition events to get scientifically grounded toolkit of exhibition pricing, developed on the basis of benchmarking and containing economic and mathematical model of the optimal market price, which takes into account the interests of the client and the organizer of the exhibition events and promotes the development of interaction between them.

APPLICATION OF THE GAME THEORY AND REFLEXIVITY WHILE DEVELOPING A MATHEMATICAL MODEL FOR CHOOSING A STRATEGY BY THE RUSSIAN BANKING MARKET PLAYERS

2020 ◽  
Vol 10 (10) ◽  
pp. 2364-2373
Author(s):  
E.A. Nechvoloda ◽  
◽  
E.B. Koreeva ◽  
S.A. Gryaznov ◽  
◽  
...  
Keyword(s):  
Mathematical Model ◽  
Game Theory ◽  
World Market ◽  
Past Century ◽  
Mathematical Science ◽  
Banking Services ◽  
Market Participants ◽  
Maximum Benefit ◽  
The Game Theory ◽  
Gradual Development

The gradual development of society and innovations in the Russian economy over the past century has led to the emergence of market relations in the country, which, unlike the planned economy that existed before, meant freedom of development and action. However, because such changes, market participants had to pay attention to new factors - risk, competition, etc. To improve the efficiency and results of decisions made in the given conditions, enterprises use game theory, thanks to which each agent can predict the actions of other agents and develop a strategy for his own game that would bring maximum benefit. Originally, game theory was a formal branch of mathematical science, although it was used to study primary economic models of the mid-20th century. However, after the Second World War, scientists acquired a more serious interest in this area, and they began to apply it in various spheres of human activity. Nowadays, game theory is actively developing, and it is used to create and analyze mathematical theoretical and applied models. This paper considers the basic concepts applicable in the analysis and optimization of the banking services market, namely, game theory, game, uncertainty, Herfindahl- Hirschman index, Nash equation, etc. Within the framework of this theory, the banking services market of the Russian segment of the world market as of 2015-2019 is considered; and an assessment of possible market situations, the agents’ moves and their effectiveness is given. A mathematical model of the strategy choice by the players in the Russian segment of the banking services market is presented, which implies reflection and interaction between players.

Coupling between phosphate and calcium homeostasis: a mathematical model

2017 ◽  
Vol 313 (6) ◽  
pp. F1181-F1199 ◽  
Author(s):  
David Granjon ◽  
Olivier Bonny ◽  
Aurélie Edwards
Keyword(s):  
Mathematical Model ◽  
Vitamin D ◽  
Parathyroid Hormone ◽  
Production Rate ◽  
Fibroblast Growth Factor 23 ◽  
Feedback Loops ◽  
Fibroblast Growth ◽  
Small Perturbations ◽  
Intracellular Pool ◽  
Negative Feedback Loops

We developed a mathematical model of calcium (Ca) and phosphate (PO4) homeostasis in the rat to elucidate the hormonal mechanisms that underlie the regulation of Ca and PO4balance. The model represents the exchanges of Ca and PO4between the intestine, plasma, kidneys, bone, and the intracellular compartment, and the formation of Ca-PO4-fetuin-A complexes. It accounts for the regulation of these fluxes by parathyroid hormone (PTH), vitamin D3, fibroblast growth factor 23, and Ca2+-sensing receptors. Our results suggest that the Ca and PO4homeostatic systems are robust enough to handle small perturbations in the production rate of either PTH or vitamin D3. The model predicts that large perturbations in PTH or vitamin D3synthesis have a greater impact on the plasma concentration of Ca2+([Ca2+]p) than on that of PO4([PO4]p); due to negative feedback loops, [PO4]pdoes not consistently increase when the production rate of PTH or vitamin D3is decreased. Our results also suggest that, following a large PO4infusion, the rapidly exchangeable pool in bone acts as a fast, transient storage PO4compartment (on the order of minutes), whereas the intracellular pool is able to store greater amounts of PO4over several hours. Moreover, a large PO4infusion rapidly lowers [Ca2+]powing to the formation of CaPO4complexes. A large Ca infusion, however, has a small impact on [PO4]p, since a significant fraction of Ca binds to albumin. This mathematical model is the first to include all major regulatory factors of Ca and PO4homeostasis.

scholarly journals Economic-mathematical model for predicting financial market dynamics

2018 ◽  
Vol 15 (4) ◽  
pp. 61-69
Author(s):  
Artur R. Musin
Keyword(s):  
Neural Network ◽  
Mathematical Model ◽  
Kalman Filter ◽  
Financial Markets ◽  
Financial Market ◽  
Future Price ◽  
Market Participants ◽  
Pricing Process ◽  
Professional Market ◽  
Correct Forecast

Study purpose.Existing approaches to forecasting dynamics of financial markets, as a rule, reduce to econometric calculations or technical analysis techniques, which in turn is a consequence of preferences among specialists, engaged in theoretical research and professional market participants, respectively. The main study purpose is developing a predictive economic-mathematical model that allows combining both approaches. In other words, this model should be estimated using traditional methods of econometrics and, at the same time, take into account the impact on the pricing process of the effect of clustering participants on behavioral patterns, as the basis of technical analysis. In addition, it is necessary that the created economic-mathematical model should take into account the phenomenon of existing historical trading levels and control the influence they exert on price dynamics, when it falls into local areas of these levels. Such analysis of price behavior patterns in certain areas of historical repeating levels is a popular approach among professional market participants. Besides, an important criterion of developing model’s potential applicability by a wide range of the interested specialists is its general functional form’s simplicity and, in particular, its components.Materials and methods. In the study, the market of the pound sterling exchange rate against the US dollar (GBP/USD) for the whole period of 2017 was chosen as the considered financial series, in order to forecast it. The presented economic-mathematical model was estimated by classical Kalman filter with an embedded neural network. The choice of these assessment tools can be explained by their wide capabilities in dealing with non-stationary, noisy financial market time series. In addition, applying Kalman filter is a popular technique for estimation local-level models, which principle was implemented in the newly model, proposed in article.Results. Using chosen approach of simultaneous applying Kalman filter and artificial neural network, there were obtained statistically significant estimations of all model’s coefficients. The subsequent model application on GBP/USD series from the test dataset allowed demonstrating its high predictive ability comparing with added random walk model, in particular judging by percentage of correct forecast directions. All received results have confirmed that constructed model allows effectively taking into account structural features of considered market and building good forecasts of future price dynamics.Conclusion. The study was focused on developing and improving apparatus of forecasting financial market prices dynamics. In turn, economic-mathematical model presented in that paper can be used both by specialists, carrying out theoretical studies of pricing process in financial markets, and by professional market participants, forecasting the direction of future price movements. High percentage of correct forecast directions makes it possible to use proposed model independently or as a confirmatory tool.

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