To snipe or not to snipe, that’s the question! Transitions in sniping behaviour among competing algorithmic traders - Under review
In this paper we re-analyse the transition from sure to probabilistic sniping as explored in Menkveld and Zoican . In that paper, the authors introduce a stylized version of a competitive game in which high frequency traders (HFTs) interact with each other and liquidity traders. The authors show that risk aversion plays an important role in the transition from sure to mixed (or probabilistic) sniping. In this paper, we re-interpret and extend these conclusions in the context of repeated games and highlight some differences in results. In particular, we identify situations in which probabilistic sniping is genuinely profitable that are qualitatively different from the ones obtained in .
|Keywords||Algorithmic trading, Sniping, Electronic exchange, High-frequency traders, Nash equilibrium, Repeated games, Bandits, Subgame-perfect equilibrium, Transition|
|Journal||Journal of Mathematics and Financial Economics|
Kokabisaghi, K, Pauwels, E.J.E.M, & Dorsman, A.B. (2019). To snipe or not to snipe, that’s the question! Transitions in sniping behaviour among competing algorithmic traders - Under review. Journal of Mathematics and Financial Economics.