A Model of Financial Market Control
This study investigates the prevention of market manipulation using a price-impact model of financial market trading as a linear system. First, I define a trading game between speculators such that they implement a manipulation trading strategy that exploits momentum traders. Second, I identify market intervention by a controller (e.g., a central bank) with a control of the system. The main result shows that there is a control strategy that prevents market manipulation as a subgame perfect equilibrium outcome of the trading game. On the equilibrium path, no intervention is realized. This study also characterizes the set of manipulation-proof linear pricing rules of the system. The set is very restrictive if there is no control, while the presence of control drastically expands the set.
Code (0)
등록된 구현이 없습니다.
Tasks
modelSimilar Papers 제목 키워드 기반
MarS: a Financial Market Simulation Engine Powered by Generative Foundation Model
Generative models aim to simulate realistic effects of various actions across different contexts, from text generation to visual effects. Despite significant efforts to build real-world simulators, the application of gen…
Language ModelingLanguage ModellingText GenerationMarket-GAN: Adding Control to Financial Market Data Generation with Semantic Context
Financial simulators play an important role in enhancing forecasting accuracy, managing risks, and fostering strategic financial decision-making. Despite the development of financial market simulation methodologies, exis…
Stock Market Predictiontext-guided-generationTime SeriesTime Series AnalysisFinancial Wind Tunnel: A Retrieval-Augmented Market Simulator
Market simulator tries to create high-quality synthetic financial data that mimics real-world market dynamics, which is crucial for model development and robust assessment. Despite continuous advancements in simulation m…
RetrievalSimulating Financial Market via Large Language Model based Agents
Most economic theories typically assume that financial market participants are fully rational individuals and use mathematical models to simulate human behavior in financial markets. However, human behavior is often not …
Language ModelingLanguage ModellingLarge Language ModelFinancial Markets and ESG: How Big Data is Transforming Sustainable Investing in Developing countries
This study explores the role of big data adoption and financial market development in driving ESG investments in developing countries, using an instrumental variable (IV) approach to address endogeneity. The results show…