Related papers: Optimal Trade Execution in Illiquid Markets
Market making is one of the most important aspects of algorithmic trading, and it has been studied quite extensively from a theoretical point of view. The practical implementation of so-called "optimal strategies" however suffers from the…
In financial markets, the order flow, defined as the process assuming value one for buy market orders and minus one for sell market orders, displays a very slowly decaying autocorrelation function. Since orders impact prices, reconciling…
We study decision timing problems on finite horizon with Poissonian information arrivals. In our model, a decision maker wishes to optimally time her action in order to maximize her expected reward. The reward depends on an unobservable…
This paper investigates the optimal investment problem in a market with two types of illiquidity: transaction costs and search frictions. Extending the framework established by arXiv:2101.09936, we analyze a power-utility maximization…
We study the optimal timing of derivative purchases in incomplete markets. In our model, an investor attempts to maximize the spread between her model price and the offered market price through optimally timing her purchase. Both the…
This paper investigates the optimal selection of portfolios for power utility maximizing investors in a financial market where stock returns depend on a hidden Gaussian mean reverting drift process. Information on the drift is obtained from…
We present a cross-market algorithmic trading system that balances execution quality with rigorous compliance enforcement. The architecture comprises a high-level planner, a reinforcement learning execution agent, and an independent…
We study discrete-time predictable forward processes when trading times do not coincide with performance evaluation times in a binomial tree model for the financial market. The key step in the construction of these processes is to solve a…
We propose a stochastic game modelling the strategic interaction between market makers and traders of optimal execution type. For traders, the permanent price impact commonly attributed to them is replaced by quoting strategies implemented…
This paper investigates optimal portfolio strategies in a market where the drift is driven by an unobserved Markov chain. Information on the state of this chain is obtained from stock prices and expert opinions in the form of signals at…
In this paper we discuss the optimal liquidation over a finite time horizon until the exit time. The drift and diffusion terms of the asset price are general functions depending on all variables including control and market regime. There is…
We present a method for determining optimal modes of operation for autonomously oscillating systems with uncertain parameters. In a typical application of the method, a nonlinear dynamical system is optimized with respect to an economic…
We study strategic interactions in a broker-mediated market in which agents learn and exploit each other's private information. A broker provides liquidity to an informed trader and to noise traders while managing inventory in a lit market.…
This paper develops a unified explicit solution theory for optimal execution through sequential limit-order placement in a limit order book. Rather than controlling only the trading speed of a metaorder, we determine how individual limit…
Markov Decision Processes (MDPs) have been used to formulate many decision-making problems in science and engineering. The objective is to synthesize the best decision (action selection) policies to maximize expected rewards (or minimize…
We study merchant energy production modeled as a compound switching and timing option. The resulting Markov decision process is intractable. State-of-the-art approximate dynamic programming methods applied to realistic instances of this…
We study a multi-agent setting in which brokers transact with an informed trader. Through a sequential Stackelberg-type game, brokers manage trading costs and adverse selection with an informed trader. In particular, supplying liquidity to…
We study perpetual American option pricing problems in an extension of the Black-Merton-Scholes model in which the dividend and volatility rates of the underlying risky asset depend on the running values of its maximum and maximum drawdown.…
Assuming geometric Brownian motion as unaffected price process $S^0$, Gatheral & Schied (2011) derived a strategy for optimal order execution that reacts in a sensible manner on market changes but can still be computed in closed form. Here…
We deal with the optimal execution problem when the broker's goal is to reach a performance barrier avoiding a downside barrier. The performance is provided by the wealth accumulated by trading in the market, the shares detained by the…