Spooner, Thomas ORCID: 0000-0002-1732-7582, Fearnley, John, Savani, Rahul ORCID: 0000-0003-1262-7831 and Koukorinis, Andreas
(2018)
Market Making via Reinforcement Learning.
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1804.04216v1.pdf - Submitted version Download (1MB) |
Abstract
Market making is a fundamental trading problem in which an agent provides liquidity by continually offering to buy and sell a security. The problem is challenging due to inventory risk, the risk of accumulating an unfavourable position and ultimately losing money. In this paper, we develop a high-fidelity simulation of limit order book markets, and use it to design a market making agent using temporal-difference reinforcement learning. We use a linear combination of tile codings as a value function approximator, and design a custom reward function that controls inventory risk. We demonstrate the effectiveness of our approach by showing that our agent outperforms both simple benchmark strategies and a recent online learning approach from the literature.
Item Type: | Other |
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Additional Information: | 10 pages, 5 figures, AAMAS2018 Conference Proceedings |
Uncontrolled Keywords: | Market Making, Limit Order Books, TD Learning, Tile Coding |
Depositing User: | Symplectic Admin |
Date Deposited: | 06 Nov 2020 16:06 |
Last Modified: | 19 Jan 2023 06:34 |
Related URLs: | |
URI: | https://livrepository.liverpool.ac.uk/id/eprint/3020818 |