Combination trading with limit orders (Q1380535)
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Combination trading with limit orders (English)
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4 March 1998
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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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economic equilibrium computation
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homotopy
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auction
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fixed-point algorithm
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optimal price
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