Applied Math Seminar | Dena Firoozi, Electronic Markets and Mean Field Games

MC 6460

Speaker

Dena Firoozi | Department of Statistical Sciences, University of Toronto

Title

Electronic Markets and Mean Field Games

Abstract

I model electronic markets consisting of institutional investors and high-frequency traders as large-population non-cooperative games, where the asset price is impacted by the average trading rate of the participants, i.e. mean field. I consider two information patterns where traders have, respectively, perfect and noisy observations on the market’s local states. The latter case leads to the introduction of the new and significant concept of estimates of estimates filtering. For both cases, this work (i) establishes the existence of ϵ-Nash equilibria which guarantee the market stability, and (ii) characterizes the best trading strategies for all traders yielding the equilibria. At the end, I discuss a generalization of the setup.