Abstract
Market Making is high frequency trading strategy in which an agent provides liquidity simultaneously quoting a bid price and an ask price on an asset. Market Makers reaps profits in the form of the spread between the quoted price placed on the buy and sell prices. Due to complexity in inventory risk, counterparties to trades and information asymmetry, understanding of market making algorithms is relatively unexplored by academicians across disciplines. In this paper, we develop realistic simulations of limit order markets and use it to design a market making agent using Deep Recurrent Q-Networks. Our approach outperforms a prominent benchmark strategy from literature, which uses temporal-difference reinforcement learning to design market maker agents. The agents successfully reproduce stylized facts in historical trade data from each simulation.
Original language | English |
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Title of host publication | AAMAS '20: Proceedings of the 19th International Conference on Autonomous Agents and MultiAgent Systems |
Editors | Bo An, Neil Yorke-Smith, Amal El Fallah Seghrouchni, Gita Sukthankar |
Number of pages | 3 |
Place of Publication | Richland, SC |
Publisher | International Foundation for Autonomous Agents and Multiagent Systems |
Publication date | 2020 |
Pages | 1892–1894 |
ISBN (Print) | 9781450375184 |
DOIs | |
Publication status | Published - 2020 |
Event | 19th International Conference on Autonomous Agents and MultiAgent Systems. AAMAS 2020 - Auckland University of Technology, Auckland, New Zealand Duration: 9 May 2020 → 13 May 2020 Conference number: 19 https://aamas2020.conference.auckland.ac.nz/ |
Conference
Conference | 19th International Conference on Autonomous Agents and MultiAgent Systems. AAMAS 2020 |
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Number | 19 |
Location | Auckland University of Technology |
Country/Territory | New Zealand |
City | Auckland |
Period | 09/05/2020 → 13/05/2020 |
Internet address |
Keywords
- Deep reinforcement learning
- Market making
- Limit order books
- High frequency trading strategies
- Agent based models