Combination trading with limit orders

DOI10.1155/S1173912697000126MaRDI QIDQ1380535zbMATH OpenOpenAlexFDO

Authors Henry Schellhorn

Publication date 4 March 1998

Published in Journal of Applied Mathematics and Decision Sciences (Search for Journal in Brave)

Full work available at URL https://eudml.org/doc/119543

zbMATH Keywords

auctioneconomic equilibrium computationfixed-point algorithmhomotopyoptimal price

Mathematics Subject Classification ID

Numerical computation of solutions to systems of equations (65H10) Computational methods for problems pertaining to operations research and mathematical programming (90-08) Linear programming (90C05) Applications of mathematical programming (90C90) Auctions, bargaining, bidding and selling, and other market models (91B26)

Review text

Summary: We model the exchange of commodities that are contingent upon each other, when traders place mostly limit orders. Examples include: 1) a market of financial futures where future spreads are also traded, 2) a market of mutual funds and stocks, 3) a market of options and stocks, under the viewpoint that they are both combinations of Arrow-Debreu securities. We prove that consistent prices are optimal. We develop a fixed-point algorithm to compute an optimal price and allocation. The algorithm combines ideas from contraction mapping theory and from homotopy theory. It is much faster than a traditional linear programming approach.

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Cited in

(5)

• A double-sided multiunit combinatorial auction for substitutes: Theory and algorithms
• Models for bundle trading in financial markets
• Pricing and clearing combinatorial markets with singleton and swap orders. Efficient algorithms for the futures opening auction problem
• A trading mechanism contingent on several indices
• The Feasibility of an Index-Contingent Trading Mechanism

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