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Bandit Market Makers

Della Penna, Nicolas; Reid, Mark

Description

We propose a flexible framework for profit-seeking market making by combining cost function based automated market makers with bandit learning algorithms. The key idea is to consider each parametrisation of the cost function as a bandit arm, and the minimum expected profits from trades executed during a period as the rewards. This allows for the creation of market makers that can adjust liquidity and bid-asks spreads dynamically to maximise profits.

CollectionsANU Research Publications
Date published: 2011
Type: Conference paper
URI: http://hdl.handle.net/1885/186624
Source: Computing Research Repository (CoRR)
Access Rights: Open Access

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