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Paper / 2023SMQ / 226130889939027
Macroscopic Market Making
Ivan Guo / Kihun Nam / Shijia Jin
market making / optimal executionResource overview

Macroscopic Market Making

Paper2023

by Ivan Guo, Kihun Nam, Shijia Jin

Tags
market makingoptimal executionoptimizationpartial differential equationsstochastic calculusstochastic differential equationsstochastic processes

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Understand this paper

Suggested foundations for market microstructure and execution and stochastic processes and pricing. Specialist prerequisites vary by paper.

Before you read

  1. Order Books

    Read bid, ask, depth and queue-based market state.

  2. Order Flow and Adverse Selection

    Understand why fills and order flow can carry information.

  3. Conditional Expectation

    Understand what it means to condition on current information.

  4. Stochastic Processes, Brownian Motion and Itô's Lemma

    Follow Brownian dynamics and the second-order term in Itô calculus.

Go further

  1. Market Impact

    Connect trading speed and size to execution cost.

  2. Implementation Shortfall

    Measure execution relative to the decision price.

  3. Market Model and Risk-Neutral Valuation

    Connect stochastic dynamics to no-arbitrage prices.

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