Algorithmic market making in dealer markets with hedging and market impact

Understand

In dealer markets, dealers provide prices at which they agree to buy and sell the assets and securities they have in their scope.

• With ever increasing trading volume, this quoting task has to be done algorithmically in most markets such as foreign exchange markets or corporate bond markets.
• Over the last ten years, many mathematical models have been designed that can be the basis of quoting algorithms in dealer markets.
• Nevertheless, in most (if not all) models, the dealer is a pure internalizer, setting quotes and waiting for clients.