Bandit Market Makers

Nicolas Della Penna; Mark D. Reid

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arXiv · 1112.0076

Bandit Market Makers

Nicolas Della Penna·Mark D. Reid

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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.

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q-fin.TR cs.GT stat.ML

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BibTeX RIS

Nicolas Della Penna, Mark D. Reid. 2013-08-02. Bandit Market Makers. https://arxiv.org/abs/1112.0076

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