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Mean-field games with rough common noise: the linear-quadratic case

arXiv:2602.19210v3 Announce Type: replace Abstract: Motivated by mean-field games (MFG) with common noise on the one hand and pathwise stochastic control theory on the other, we formulate here a linear-quadratic (LQ) MFG with rough common noise, along with a satisfactory well-posedness theory for the linear-quadratic case. A novel Volterra-type (or mild) formulation allows to keep technical (rough-stochastic) consideration to a minimum. We derive a characterization of the optimal state and optimal control through a rough forward-backward SDE (rough FBSDE), and provide an existence and uniqueness result under the usual assumptions. Our theory is accompanied by stability estimates with respect to initial data and common noise while we also establish continuity of what we call the Itô-Lions-Lyons map for rough mean-field games. Finally, we discuss randomization of the rough common noise under appropriate conditions on the coefficients. When the latter is given by the Stratonovich lift of a Brownian motion independent of the idiosyncratic noise, we show that solutions of the rough LQ MFG coincide with those obtained by conditioning on the common noise.

Second-Order Approximation of Limit Order Books in a Single-Scale Regime

arXiv:2308.00805v3 Announce Type: replace-cross Abstract: We establish a first- and second-order approximation for an infinite dimensional limit order book model in a single (critical) scaling regime where market and limit orders arrive at a common time scale. With our choice of scaling we obtain non-degenerate first- and second-order approximations for the price and volume dynamics. While the first-order approximation is given by a coupled ODE-PDE system, the second-order approximation is described in terms of an infinite-dimensional stochastic evolution equation driven by a cylindrical Brownian motion. The driving noise processes exhibit a non-trivial correlation in terms of the model parameters. We prove that the evolution equation has a unique solution and that the sequence of standardized limit order book models converges weakly to the solution of the evolution equation. The proof uses a non-standard martingale problem. We calibrate a linearized model to market data and explain how our model can be used for deriving confidence intervals of portfolio liquidation values.