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.
Table of Content
Utility Functions
Avellaneda & Stoikov
Fitting the Model Parameters
Inventory Based Models
Information Based Models
Guéant–Lehalle–Fernandez-Tapia
Market Making with Alphas
Cartea-Jaimungal
Cartea-Jaimungal-Ricci
Final Remarks