Wasserstein Robust Market Making via Entropy Regularization

Zhou Fang and Arie Israel

Papers from arXiv.org

Abstract: In this paper, we introduce a robust market making framework based on Wasserstein distance, utilizing a stochastic policy approach enhanced by entropy regularization. We demonstrate that, under mild assumptions, the robust market making problem can be reformulated as a convex optimization question. Additionally, we outline a methodology for selecting the optimal radius of the Wasserstein ball, further refining our framework's effectiveness.

Date: 2025-03
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2503.04072

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