Speaker: Yixuan Wang
Titile: Minimum resting time with market orders
Abstract: Regulators have been discussing possible rules to control high frequency trading and decrease market speed, and minimum resting time is one of them. We develop a simple mathematical model, and derive an asymptotic expression of the expected PnL, which is also the performance criteria that a market maker would like to maximize by choosing the optimal depth at which she posts the limit order. We investigate the comparative statistics of the optimal depth with each parameters, an in particular the comparative statistics show that the minimum resting time will decrease the market liquidity, forcing the market makers to post limit orders of volume 1.
Speaker: Marco Pangallo
Title: Does learning converge in generic games?
Abstract: In game theory, learning has often been proposed as a convincing method to achieve coordination on an equilibrium. But does learning converge, and to what? We start investigating the drivers of instability in the simplest possible non-trivial setting, that is generic 2-person, 2-strategy normal form games. In payoff matrices with a unique mixed strategy equilibrium the players may follow the best-reply cycle and fail to converge to the Nash Equilibrium (NE): we rather observe limit cycles or low-dimensional chaos. We then characterize the cyclic structure of games with many moves as a combinatorial problem: we quantify exactly how many best-reply configurations give rise to cycles or to NE, and show that acyclic (e.g. coordination, potential, supermodular) games become more and more rare as the number of moves increases (a fortiori if the payoffs are negatively correlated and with more than two players). In most games the learning dynamics ends up in limit cycles or high-dimensional chaotic attractors, preventing the players to coordinate. Strategic interactions would then be governed by learning in an ever-changing environment, rather than by rational and fully-informed equilibrium thinking.
Collaborators: J. D. Farmer, T. Galla, T. Heinrich, J. Sanders
- Mathematical Finance Internal Seminar