Related papers: Empirical Limitations on High Frequency Trading Pr…
In this review article we explore several recent advances in the quantitative modeling of financial markets. We begin with the Efficient Markets Hypothesis and describe how this controversial idea has stimulated a number of new directions…
We demonstrate an application of risk-sensitive reinforcement learning to optimizing execution in limit order book markets. We represent taking order execution decisions based on limit order book knowledge by a Markov Decision Process; and…
There are inefficiencies in financial markets, with unexploited patterns in price, volume, and cross-sectional relationships. While many approaches use large-scale transformers, we take a domain-focused path: feed-forward and recurrent…
In this paper we study the asymptotic behavior of a Boltzmann type price formation model, which describes the trading dynamics in a financial market. In many of these markets trading happens at high frequencies and low transactions costs.…
A precise estimation of the Rate of Change of Frequency (RoCoF) is crucial for secure power system operation. In fact, RoCoF is strictly related to the amount of the available physical and/or virtual inertia of the system and the severity…
We extend the framework of trading strategies of Gatheral [2010] from single stocks to a pair of stocks. Our trading strategy with the executions of two round-trip trades can be described by the trading rates of the paired stocks and the…
The fundamental theorem behind financial markets is that stock prices are intrinsically complex and stochastic. One of the complexities is the volatility associated with stock prices. Volatility is a tendency for prices to change…
We present a deep long short-term memory (LSTM)-based neural network for predicting asset prices, together with a successful trading strategy for generating profits based on the model's predictions. Our work is motivated by the fact that…
While $\mathcal{H}_\infty$ methods can introduce robustness against worst-case perturbations, their nominal performance under conventional stochastic disturbances is often drastically reduced. Though this fundamental tradeoff between…
We introduce a new stochastic duration model for transaction times in asset markets. We argue that widely accepted rules for aggregating seemingly related trades mislead inference pertaining to durations between unrelated trades: while any…
In this paper, we investigate trading strategies based on exponential moving averages (ExpMAs) of an underlying risky asset. We study both logarithmic utility maximization and long-term growth rate maximization problems and find closed-form…
Traders buy and sell financial instruments in hopes of making profit, and brokers are responsible for the transaction. There are several hypotheses and conspiracy theories arguing that in some situations, brokers want their traders to lose…
We consider a financial market where the asset price follows a fractional Brownian motion. We introduce a family of investment strategies, and quantify profit possibilities for both persistent and antipersistant markets.
We introduce a Hawkes-like process and study its scaling limit as the system becomes increasingly endogenous. We derive functional limit theorems for intensity and fluctuations. Then, we introduce a high-frequency model for a price of a…
We conduct an extensive evaluation of price jump tests based on high-frequency financial data. After providing a concise review of multiple alternative tests, we document the size and power of all tests in a range of empirically relevant…
We model the trading activity between a broker and her clients (informed and uninformed traders) as an infinite-horizon stochastic control problem. We derive the broker's optimal dealing strategy in closed form and use this to introduce an…
The analysis of high-frequency financial data is often impeded by the presence of noise. This article is motivated by intraday return data in which market microstructure noise appears to be rough, that is, best captured by a continuous-time…
Low-carbon societies will need to store vast amounts of electricity to balance intermittent generation from wind and solar energy, for example, through frequency regulation. Here, we derive an analytical solution to the decision-making…
We introduce an event based framework of directional changes and overshoots to map continuous financial data into the so-called Intrinsic Network - a state based discretisation of intrinsically dissected time series. Defining a method for…
We consider a dynamic portfolio optimization problem that incorporates predictable returns, instantaneous transaction costs, price impact, and stochastic volatility, extending the classical results of Garleanu and Pedersen (2013), which…