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Market Making Models

An overview of the literature

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Vertox
Nov 05, 2024
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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.


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

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