Time-Dependent Trading Strategies in a Continuous Double Auction

16 Pages Posted: 17 May 2011

See all articles by Shira Fano

Shira Fano

Bocconi University - Department of Economics

Paolo Pellizzari

Ca Foscari University of Venice - Dipartimento di Economia

Date Written: April 1, 2011

Abstract

We model a continuous double auction with heterogenous agents and compute approximate optimal trading strategies using evolution strategies. Agents privately know their values and costs and have a limited time to transact. We focus on equilibrium strategies that are developed taking into account the number of traders that submitted orders previously, as well as the number of who will submit subsequently. We find that it is optimal to place increasingly aggressive orders, according to a roughly linear schedule, and test the resulting equilibrium for robustness and accuracy.

Keywords: Continuous double auction, equilibrium trading strategies, evolution strategies

JEL Classification: D53, D44, C61, C63

Suggested Citation

Fano, Shira and Pellizzari, Paolo, Time-Dependent Trading Strategies in a Continuous Double Auction (April 1, 2011). University Ca' Foscari of Venice, Department of Economics Research Paper No. 3, Available at SSRN: https://ssrn.com/abstract=1843305 or http://dx.doi.org/10.2139/ssrn.1843305

Shira Fano

Bocconi University - Department of Economics

Via Roentgen 1
Milan, 20136
Italy

Paolo Pellizzari (Contact Author)

Ca Foscari University of Venice - Dipartimento di Economia ( email )

Cannaregio 873
Venice, 30121
Italy

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