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Optimal High-Frequency Market Making

Optimal High-Frequency Market MakingTakahiro Fushimi, Christian Gonz alez Rojas,and Molly Herman{tfushimi, cgrojas, 11, 2018 AbstractThe paper implements and analyzes the high frequency Market Making pricingmodel by Avellaneda and Stoikov (2008). This pricing model is integrated with aproprietary inventory control model that dynamically adjusts the order size to mitigateinventory risk, the risk that we bear due to our inventory. Then, we develop a tradingsimulator to assess the P&L and inventory of our Optimal pricing strategy in com-parison to a baseline pricing model for five representative stocks.}

2.1 Pricing We use the optimal market making model developed byAvellaneda and Stoikov(2008) as our ... Cancel the outstanding order Quote new bid and ask prices else Wait end else if 2 orders in the book then ... 3.2 Order Execution

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  Order, Pricing, Quotes, Order 2, Order quote

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