Related papers: Optimal Trade Execution in Illiquid Markets

A hypothetical risk-neutral agent who trades to maximize the expected profit of the next trade will approximately exhibit long-term optimal behavior as long as this agent uses the vector $p = \nabla V (t, x)$ as effective microstructure…

Increased day-trading activity and the subsequent jump in intraday volatility and trading volume fluctuations has raised considerable interest in models for financial market microstructure. We investigate the random transitions between two…

This paper studies the equilibrium pricing of asset shares in the presence of dynamic private information. The market consists of a risk-neutral informed agent who observes the firm value, noise traders, and competitive market makers who…

We propose a general approximation method for determining optimal trading strategies in markets with proportional transaction costs, with a polynomial approximation of the residual value function. The method is exemplified by several…

We study a dynamic matching setting where homogeneous agents arrive at random according to a Poisson process and randomly form edges yielding a sparse market. Agents stay in the market according to a certain sojourn time and wait to be…

We consider a one-period Kyle (1985) framework where the insider can be subject to a penalty if she trades. We establish existence and uniqueness of equilibrium for virtually any penalty function when noise is uniform. In equilibrium, the…

I present an overview of some recent advancements on the empirical analysis and theoretical modeling of the process of price formation in financial markets as the result of the arrival of orders in a limit order book exchange. After…

We study a dynamic portfolio optimization problem related to convergence trading, which is an investment strategy that exploits temporary mispricing by simultaneously buying relatively underpriced assets and selling short relatively…

In this paper, we study a continuous-time discounted jump Markov decision process with both controlled actions and observations. The observation is only available for a discrete set of time instances. At each time of observation, one has to…

We provide a characterization of revenue-optimal dynamic mechanisms in settings where a monopolist sells k items over k periods to a buyer who realizes his value for item i in the beginning of period i. We require that the mechanism…

As the FX markets continue to evolve, many institutions have started offering passive access to their internal liquidity pools. Market makers act as principal and have the opportunity to fill those orders as part of their risk management,…

We consider an illiquid financial market with different regimes modeled by a continuous-time finite-state Markov chain. The investor can trade a stock only at the discrete arrival times of a Cox process with intensity depending on the…

In this paper we introduce a completely continuous and time-variate model of the evolution of market limit orders based on the existence, uniqueness, and regularity of the solutions to a type of stochastic partial differential equations…

In this paper we investigate a new class of growth rate maximization problems based on impulse control strategies such that the average number of trades per time unit does not exceed a fixed level. Moreover, we include proportional…

We consider a finite-horizon market-making problem faced by a dark pool that executes incoming buy and sell orders. The arrival flow of such orders is assumed to be random and, for each transaction, the dark pool earns a per-share…

We investigate the optimal execution of contracts that are used in merger\&acquisition deals. We consider cash-settled and physically delivered contracts between a broker and a counterpart. Contracts are linear (total returns swaps),…

This paper considers an optimal impulse control problem of dynamical systems generated by a flow. The performance criteria are total costs over the infinite time horizon. Apart from the main performance to be minimized, there are multiple…

We consider optimal execution strategies for block market orders placed in a limit order book (LOB). We build on the resilience model proposed by Obizhaeva and Wang (2005) but allow for a general shape of the LOB defined via a given density…

This paper focuses on some simple models of limit order book dynamics which simulate market trading mechanisms. We start with a discrete time/space Markov process and then perform a re-scaling procedure leading to a deterministic dynamical…

The primary objective of this paper is to conceive and develop a new methodology to detect notable changes in liquidity within an order-driven market. We study a market liquidity model which allows us to dynamically quantify the level of…