Optimal, Truthful, and Private Securities Lending

12/12/2019
by   Emily Diana, et al.
0

We consider a fundamental dynamic allocation problem motivated by the problem of securities lending in financial markets, the mechanism underlying the short selling of stocks. A lender would like to distribute a finite number of identical copies of some scarce resource to n clients, each of whom has a private demand that is unknown to the lender. The lender would like to maximize the usage of the resource avoiding allocating more to a client than her true demand but is constrained to sell the resource at a pre-specified price per unit, and thus cannot use prices to incentivize truthful reporting. We first show that the Bayesian optimal algorithm for the one-shot problem which maximizes the resource's expected usage according to the posterior expectation of demand, given reports actually incentivizes truthful reporting as a dominant strategy. Because true demands in the securities lending problem are often sensitive information that the client would like to hide from competitors, we then consider the problem under the additional desideratum of (joint) differential privacy. We give an algorithm, based on simple dynamics for computing market equilibria, that is simultaneously private, approximately optimal, and approximately dominant-strategy truthful. Finally, we leverage this private algorithm to construct an approximately truthful, optimal mechanism for the extensive form multi-round auction where the lender does not have access to the true joint distributions between clients' requests and demands.

READ FULL TEXT

page 1

page 2

page 3

page 4

03/09/2020

Mechanism design for large scale systems

In this paper, we consider infinite number of non atomic self-interested...
05/18/2020

Joint Index Coding and Incentive Design for Selfish Clients

The index coding problem includes a server, a group of clients, and a se...
04/22/2009

Incentive Compatible Budget Elicitation in Multi-unit Auctions

In this paper, we consider the problem of designing incentive compatible...
07/01/2021

Multi-Access Coded Caching with Demand Privacy

The demand private coded caching problem in a multi-access network with ...
10/31/2011

Obtaining Reliable Feedback for Sanctioning Reputation Mechanisms

Reputation mechanisms offer an effective alternative to verification aut...
12/02/2020

Mechanism Design for Demand Management in Energy Communities

We consider a demand management problem of an energy community, in which...
04/27/2017

Optimal client recommendation for market makers in illiquid financial products

The process of liquidity provision in financial markets can result in pr...