Bandit Market Makers

Nicolás Della Penna and Mark D. Reid

Papers from arXiv.org

Abstract: We introduce a modular framework for market making. It combines cost-function based automated market makers with bandit algorithms. We obtain worst-case profits guarantee's relative to the best in hindsight within a class of natural "overround" cost functions . This combination allow us to have distribution-free guarantees on the regret of profits while preserving the bounded worst-case losses and computational tractability over combinatorial spaces of the cost function based approach. We present simulation results to better understand the practical behaviour of market makers from the framework.

Date: 2011-11, Revised 2013-08
New Economics Papers: this item is included in nep-cmp
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