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trialanderror


Total Posts: 48
Joined: Feb 2019
 
Posted: 2020-01-10 08:03
Any opinions/comments on this paper? Optimal market making

Nous promettons selon nos espérances, et nous tenons selon nos craintes.

trialanderror


Total Posts: 48
Joined: Feb 2019
 
Posted: 2020-01-11 14:37
85 views no comments? I'd really appreciate an educated view on the model this paper presents.

Nous promettons selon nos espérances, et nous tenons selon nos craintes.

gaj


Total Posts: 103
Joined: Apr 2018
 
Posted: 2020-01-12 15:46
Skimmed through the paper. For this to be useful in a high dimensional setting, closed-form approximation is indispensable. But it seems that the closed-form is only given for the uninteresting case of T->infinity. Also not sure how much value there is in solving this optimal control problem vs using simple heuristics.

I feel like a lot of quant approaches fall into one of two categories:
1) model the full dynamics of the system; calibrate the parameters; then solve for the function that you need.
2) parametrize the function that you're looking for with a number of inputs; define an objective function; use supervised learning to find the optimal solution.

Andrew Ng wrote something similar in the context of classification, where he called approach 1 "generative" and approach 2 "discriminative". A lot of fancy papers are written in (1). It usually requires more assumption, harder to calibrate, and rarely gives a closed-form solution. On the other hand, approach (2) by design provides a closed form solution and is easier to solve. My impression is that most practitioners use approach 2 in the real world.

trialanderror


Total Posts: 48
Joined: Feb 2019
 
Posted: 2020-01-12 17:55
That's very interesting to learn, I was not aware it was possible to classify the problem like that.

Nous promettons selon nos espérances, et nous tenons selon nos craintes.
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