Related papers: Optimal Trade Execution in Illiquid Markets
We study optimal buying and selling strategies in target zone models. In these models the price is modeled by a diffusion process which is reflected at one or more barriers. Such models arise for example when a currency exchange rate is…
We study an optimal execution problem in a continuous-time market model that considers market impact. We formulate the problem as a stochastic control problem and investigate properties of the corresponding value function. We find that…
We give a complete solution to the problem of minimizing the expected liquidity costs in presence of a general drift when the underlying market impact model has linear transient price impact with exponential resilience. It turns out that…
We prove the existence of optimal strategies for agents with cumulative prospect theory preferences who trade in a continuous-time illiquid market, transcending known results which pertained only to risk-averse utility maximizers. The…
This paper studies optimal market making for large-tick assets in the presence of latency. We consider a random walk model for the asset price, and formulate the market maker's optimization problem using Markov Decision Processes (MDP). We…
In a continuous-time model with multiple assets described by c\`{a}dl\`{a}g processes, this paper characterizes superhedging prices, absence of arbitrage, and utility maximizing strategies, under general frictions that make execution prices…
This work's purpose is to understand the dynamics of limit order books in order-driven markets. We try to illustrate a dynamical trading mechanism attached to the microstructure of limit order markets. We capture the iterative nature of…
This work is about optimal order execution, where a large order is split into several small orders to maximize the implementation shortfall. Based on the diversity of cryptocurrency exchanges, we attempt to extract cross-exchange signals by…
We consider the learning dynamics of a single reinforcement learning optimal execution trading agent when it interacts with an event driven agent-based financial market model. Trading takes place asynchronously through a matching engine in…
We revisit optimal execution of an active portfolio in the presence of slippage (aka linear, proportional, or absolute-value) costs. Market efficiency implies a close balance between active alphas and trading costs, so even small changes to…
Most of the existing literature on optimal trade execution in limit order book models assumes that resilience is positive. But negative resilience also has a natural interpretation, as it models self-exciting behaviour of the price impact,…
This paper focuses on an extension of the Limit Order Book (LOB) model with general shape introduced by Alfonsi, Fruth and Schied. Here, the additional feature allows a time-varying LOB depth. We solve the optimal execution problem in this…
We study the optimal liquidation problem in a market model where the bid price follows a geometric pure jump process whose local characteristics are driven by an unobservable finite-state Markov chain and by the liquidation rate. This model…
We assume a continuous-time price impact model similar to Almgren-Chriss but with the added assumption that the price impact parameters are stochastic processes modeled as correlated scalar Markov diffusions. In this setting, we develop…
Portfolio traders strive to identify dynamic portfolio allocation schemes so that their total budgets are efficiently allocated through the investment horizon. This study proposes a novel portfolio trading strategy in which an intelligent…
We consider a discrete-time financial market model with finite time horizon and give conditions which guarantee the existence of an optimal strategy for the problem of maximizing expected terminal utility. Equivalent martingale measures are…
Evolutions of the trading landscape lead to the capability to exchange the same financial instrument on different venues. Because of liquidity issues, the trading firms split large orders across several trading destinations to optimize…
This paper deals with optimal prediction in a regime-switching model driven by a continuous-time Markov chain. We extend existing results for geometric Brownian motion by deriving optimal stopping strategies that depend on the current…
We develop a mixed control framework that combines absolutely continuous controls with impulse interventions subject to stochastic execution delays. The model extends current impulse control formulations by allowing (i) the controller to…
This study explores the design of an efficient rebate policy in auction markets, focusing on a continuous-time setting with competition among market participants. In this model, a stock exchange collects transaction fees from auction…