Models for bundle trading in financial markets

Models for bundle trading in financial markets

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Article ID: iaor20053162
Country: Netherlands
Volume: 160
Issue: 1
Start Page Number: 88
End Page Number: 105
Publication Date: Jan 2005
Journal: European Journal of Operational Research
Authors: , ,
Keywords: bidding, game theory
Abstract:

Bundle trading is a new trend in financial markets that allows traders to submit consolidated orders to sell and buy packages of assets. We propose a new bundle-based market-clearing formulation for portfolio balancing that extends the previous models in the literature through a more detailed representation of portfolios and the formulation of new bidding requirements. We also present post-optimality tie-breaking procedures intended to discriminate between equivalent orders on the basis of submission times. Numerical results evaluate the “bundle” effect as well as the bidding flexibility and the computational complexity of the formulation.

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