CTMSTOU driven markets: simulated environment for regime-awareness in trading policies

• URL: http://arxiv.org/abs/2202.00941v2
• Date: Thu, 3 Feb 2022 11:04:17 GMT
• Title: CTMSTOU driven markets: simulated environment for regime-awareness in trading policies
• Authors: Selim Amrouni, Aymeric Moulin, Tucker Balch
• Abstract summary: We introduce a novel process to model the fundamental value perceived by market participants: Continuous-Time Markov Switching Trending Ornstein-Uhlenbeck (CTMSTOUrnstein) We define the notion of regime-awareness for a trading agent as well and illustrate its importance through the study of different order placement strategies in the context of order execution problems.
• Score: 0.0
• License: http://arxiv.org/licenses/nonexclusive-distrib/1.0/
• Abstract: Market regimes is a popular topic in quantitative finance even though there is little consensus on the details of how they should be defined. They arise as a feature both in financial market prediction problems and financial market task performing problems. In this work we use discrete event time multi-agent market simulation to freely experiment in a reproducible and understandable environment where regimes can be explicitly switched and enforced. We introduce a novel stochastic process to model the fundamental value perceived by market participants: Continuous-Time Markov Switching Trending Ornstein-Uhlenbeck (CTMSTOU), which facilitates the study of trading policies in regime switching markets. We define the notion of regime-awareness for a trading agent as well and illustrate its importance through the study of different order placement strategies in the context of order execution problems.

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