Market Making Models

An overview of the literature

We’ve all heard those 2 names being dropped before: Avellaneda & Stoikov.
Whenever those names drop it’s about the market making model from their paper High-frequency trading in a limit order book.

Beyond that you don’t really hear about other market making models all that often even though the A&S model is really limiting.

In this article I’m gonna be summarizing results of some popular market making papers.

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Table of Content

1. Utility Functions

2. Avellaneda & Stoikov

3. Fitting the Model Parameters

4. Inventory Based Models

5. Information Based Models

6. Guéant–Lehalle–Fernandez-Tapia

7. Market Making with Alphas

8. Cartea-Jaimungal

9. Cartea-Jaimungal-Ricci

10. Final Remarks