Olivier Guéant: An Overview of Market Making Models and Recent Applications in the Gold Market

Abstract

Since the seminal work of Ho and Stoll, later refined by Avellaneda and Stoikov, algorithmic market-making models have evolved to incorporate increasingly realistic features such as trade sizes, complex price dynamics, tiering, externalization, and market impact. These models have been applied to a wide range of assets, from illiquid corporate bonds to highly liquid foreign exchange markets to cryptocurrencies (price-aware AMMs). This talk will provide an overview of the key developments of the past decade, highlighting both theoretical advancements and practical applications. It will then focus on recent applications of these models in the gold market by Barzykin, Bergault and I. In terms of mathematics, the tools used will be stochastic optimal control, optimization, variational calculus and stochastic filtering.