Closed-form Approximations in Multi-asset Market Making - Archive ouverte HAL
Article Dans Une Revue Applied Mathematical Finance Année : 2021

Closed-form Approximations in Multi-asset Market Making

Résumé

A large proportion of market making models derive from the seminal model of Avellaneda and Stoikov. The numerical approximation of the value function and the optimal quotes in these models remains a challenge when the number of assets is large. In this article, we propose closed-form approximations for the value functions of many multi-asset extensions of the Avellaneda–Stoikov model. These approximations or proxies can be used (i) as heuristic evaluation functions, (ii) as initial value functions in reinforcement learning algorithms, and/or (iii) directly to design quoting strategies through a greedy approach. Regarding the latter, our results lead to new and easily interpretable closed-form approximations for the optimal quotes, both in the finite-horizon case and in the asymptotic (ergodic) regime.

Dates et versions

hal-03680074 , version 1 (27-05-2022)

Identifiants

Citer

Philippe Bergault, Olivier Guéant, David Evangelista, Douglas Vieira. Closed-form Approximations in Multi-asset Market Making. Applied Mathematical Finance, 2021, 28 (2), pp.101-142. ⟨10.1080/1350486X.2021.1949359⟩. ⟨hal-03680074⟩
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