Related papers: Optimal Trade Execution in Illiquid Markets
We consider a framework for solving optimal liquidation problems in limit order books. In particular, order arrivals are modeled as a point process whose intensity depends on the liquidation price. We set up a stochastic control problem in…
We consider the problem of dynamic buying and selling of shares from a collection of $N$ stocks with random price fluctuations. To limit investment risk, we place an upper bound on the total number of shares kept at any time. Assuming that…
We study an optimal liquidation problem with multiplicative price impact in which the trend of the asset's price is an unobservable Bernoulli random variable. The investor aims at selling over an infinite time-horizon a fixed amount of…
In this paper, we employ the Heston stochastic volatility model to describe the stock's volatility and apply the model to derive and analyze the optimal trading strategies for dealers in a security market. We also extend our study to option…
A novel high-frequency market-making approach in discrete time is proposed that admits closed-form solutions. By taking advantage of demand functions that are linear in the quoted bid and ask spreads with random coefficients, we model the…
We consider the optimal trade execution strategies for a large portfolio of single stocks proposed by Almgren (2003). This framework accounts for a nonlinear impact of trades on average market prices. The results of Almgren (2003) are based…
We study an optimal execution problem in the presence of market impact where the security price follows a geometric Ornstein-Uhlenbeck process, which implies the mean-reverting property, and show that the optimal strategy is a mixture of…
In this study, we introduce an explicit trading-volume process into the Almgren-Chriss model, which is a standard model for optimal execution. We propose a penalization method for deriving a verification theorem for an adaptive optimization…
This paper studies a portfolio optimization problem in a discrete-time Markovian model of a financial market, in which asset price dynamics depend on an external process of economic factors. There are transaction costs with a structure that…
Market participants regularly send bid and ask quotes to exchange-operated limit order books. This creates an optimization challenge where their potential profit is determined by their quoted price and how often their orders are…
In this work we study a finite horizon optimal liquidation problem with multiplicative price impact in algorithmic trading, using market orders. We analyze the case when an agent is trading on a market with two financial assets, whose…
We investigate the well-posedness in the Hadamard sense and the absence of price manipulation in the optimal execution problem within the Almgren-Chriss framework, where the temporary and permanent impact parameters vary deterministically…
An attempt to obtain market directional information from non-stationary solution of the dynamic equation: "future price tends to the value maximizing the number of shares traded per unit time" is presented. A remarkable feature of the…
This paper studies an optimal trading problem that incorporates the trader's market view on the terminal asset price distribution and uninformative noise embedded in the asset price dynamics. We model the underlying asset price evolution by…
We consider an optimal liquidation problem with instantaneous price impact and stochastic resilience for small instantaneous impact factors. Within our modelling framework, the optimal portfolio process converges to the solution of an…
Execution algorithms are vital to modern trading, they enable market participants to execute large orders while minimising market impact and transaction costs. As these algorithms grow more sophisticated, optimising them becomes…
We analyze a continuous-time optimal trade execution problem in multiple assets where the price impact and the resilience can be matrix-valued stochastic processes that incorporate cross-impact effects. In addition, we allow for stochastic…
This paper studies learning in markets with aggregate uncertainty about whether trade is efficient. A long-lived seller offers prices to buyers, who are short-lived and arrive according to a Poisson process. A hidden state determines…
The paper addresses the problem of meta order execution from a broker-dealer's point of view in Almgren-Chriss model under execution risk. A broker-dealer agency is authorized to execute an order of trading on some client's behalf. The…
We consider a portfolio optimization problem in a defaultable market with finitely-many economical regimes, where the investor can dynamically allocate her wealth among a defaultable bond, a stock, and a money market account. The market…