In this paper we examine the question of whether knowledge of the information contained in a limit order book helps to provide economic value in a simple trading scheme. Given the greater information content of the order book, over simple price information, it might naturally be expected that...

This paper examines the predictability of exchange rates on a transaction level basis using both past transaction prices and the structure of the order book. In contrast to the existing literature we also recognise that the trader may be subject to (Knightian) uncertainty as opposed to risk...

In this paper we test whether investors are uncertainty averse during a real-life trading process in the foreign exchange market. We do this through an agent-based model in which fundamentalist and chartist beliefs of the exchange rate are allowed to be either uncertainty neutral or uncertainty...

We consider a model of external financing in which entrepreneurs are privately informed about the quality of their projects and seek funds from competitive financiers. The literature restricts attention to monotonic or ‘manipulation proof' securities and finds that straight debt is the unique...

We study the relation between limit order flow, market order flow and returns. We develop a model where market-makers face inventory risk and adverse selection and show how prices depend on market and limit order flows. In the model, market-makers receive information through trade with customers...

When a pair of independent series are highly persistent, there is a spurious regression bias in a regression between these series, closely related to the classic studies of Granger and Newbold [1974]. Although this is well known to occur with independent I(1) processes, this paper provides...

This paper introduces a class of non-additive anonymous games where agents are assumed to be uncertain (in the sense of Knight) about opponents' strategies and about the initial distribution over players' characteristics in the game. We model uncertainty by non-additive measures or capacities...

In this paper, we challenge the notion that exploiting “riskless” arbitrage is riskless. We show that if rational agents face uncertainty about completing their arbitrage portfolios, then arbitrage is limited even in markets with perfect substitutes and convertibility. We call this...

In this paper, we study the mechanisms that govern price stability of MakerDAO's DAI token, the first decentralized stablecoin. DAI works through a set of autonomous smart contracts, in which users deposit cryptocurrency collateral, typically Ethereum, and borrow a fraction of their positions as...

We study the effect of the predictability of order imbalance on market quality. We measure the degree of predictability by using the predictive likelihood from a dynamic linear model where the dependent variable is the day-ahead order imbalance. Empirically, we show that increasing order...