Scholars Release Research Paper on Competitive Market Making Equilibrium and Learning
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Matteo Onger and Luigi Foscari have published a research paper on competitive market making game equilibrium and learning in arXiv q-fin, constructing a market making game model involving N ≥ 2 strategic market makers and one non-strategic representative trader. The paper proves that under minimal assumptions about the distribution of the underlying asset value, at least one pure-strategy Nash equilibrium always exists, and the equilibrium bid-ask spread widens strictly with the volatility of the asset value. The paper constructs a tractable learning framework by discretizing prices, proving that the time-averaged game of no-internal-regret learners approaches the continuous Nash price envelope as the minimum tick size tends to zero, and validates the theoretical results through numerical simulations.
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- arXiv q-finEquilibrium and Learning in Competitive Market Making
This paper proposes a market-making game model involving N≥2 strategic market makers and one non-strategic representative trader. It proves that under minimal assumptions on the underlying asset value distribution, at least one pure-strategy Nash equilibrium always exists, and the equilibrium bid-ask spread widens strictly with the volatility of the asset value. By discretizing prices, a tractable learning framework is constructed, proving that the time-averaged game of no-internal-regret learners approximates the continuous Nash price envelope as the tick size approaches zero. Numerical simulations validate the theoretical results.
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