Related papers: Time Consistent Dynamic Limit Order Books Calibrat…
This paper addresses a key challenge in CDO modeling: achieving a perfect fit to market prices across all tranches using a single, consistent model. The existence of such a perfect-fit model implies the absence of arbitrage among CDO…
We propose a model for the dynamics of a limit order book in a liquid market where buy and sell orders are submitted at high frequency. We derive a functional central limit theorem for the joint dynamics of the bid and ask queues and show…
This paper develops an adaptive traffic control policy inspired by Maximum Pressure (MP) while imposing coordination across intersections. The proposed Coordinated Maximum Pressure-plus-Penalty (CMPP) control policy features a local…
We derive a new high-order compact finite difference scheme for option pricing in stochastic volatility models. The scheme is fourth-order accurate in space and second-order accurate in time. Under some restrictions, theoretical results…
This paper presents a new theory, known as robust dynamic pro- gramming, for a class of continuous-time dynamical systems. Different from traditional dynamic programming (DP) methods, this new theory serves as a fundamental tool to analyze…
Cai, Song and Kou (2015) [Cai, N., Y. Song, S. Kou (2015) A general framework for pricing Asian options under Markov processes. Oper. Res. 63(3): 540-554] made a breakthrough by proposing a general framework for pricing both discretely and…
We introduce Conformal Decision Theory, a framework for producing safe autonomous decisions despite imperfect machine learning predictions. Examples of such decisions are ubiquitous, from robot planning algorithms that rely on pedestrian…
In many mobile robotics scenarios, such as drone racing, the goal is to generate a trajectory that passes through multiple waypoints in minimal time. This problem is referred to as time-optimal planning. State-of-the-art approaches either…
We propose a time-adaptive, high-order compact finite difference scheme for option pricing in a family of stochastic volatility models. We employ a semi-discrete high-order compact finite difference method for the spatial discretisation,…
The problem of constrained Markov decision process is considered. An agent aims to maximize the expected accumulated discounted reward subject to multiple constraints on its costs (the number of constraints is relatively small). A new dual…
We demonstrate the application of an algorithmic trading strategy based upon the recently developed dynamic mode decomposition (DMD) on portfolios of financial data. The method is capable of characterizing complex dynamical systems, in this…
Financial market simulation (FMS) serves as a promising tool for understanding market anomalies and the underlying trading behaviors. To ensure high-fidelity simulations, it is crucial to calibrate the FMS model for generating data closely…
Suppose you are a fund manager with \$100 million to deploy and two years to invest it. A deal comes across your desk that looks appealing but costs \$50 million -- half of your available capital. Should you take it, or wait for something…
Stochastic clocks represent a class of time change methods for incorporating trading activity into continuous-time financial models, with the ability to deal with typical asymmetrical and tail risks in financial returns. In this paper we…
We consider the problem of option hedging in a market with proportional transaction costs. Since super-replication is very costly in such markets, we replace perfect hedging with an expected loss constraint. Asymptotic analysis for small…
We consider multiple parallel Markov decision processes (MDPs) coupled by global constraints, where the time varying objective and constraint functions can only be observed after the decision is made. Special attention is given to how well…
We study the optimal order placement strategy with the presence of a liquidity cost. In this problem, a stock trader wishes to clear her large inventory by a predetermined time horizon $T$. A trader uses both limit and market orders, and a…
We design a novel calibration procedure that is designed to handle the specific characteristics of options on cryptocurrency markets, namely large bid-ask spreads and the possibility of missing or incoherent prices in the considered data…
The law of one price (LOP) broadly asserts that identical financial flows should command the same price. We show that, when properly formulated, LOP is the minimal condition for a well-defined mean-variance portfolio selection framework…
It is first shown that a smooth controllable system on a compact manifold is finite time controllable. The technique of proof is close to the one of Sussmann's orbit theorem, and no rank condition is required. This technique is also used to…