Related papers: Empirical Limitations on High Frequency Trading Pr…
I study the limit of a large random economy, where a set of consumers invests in financial instruments engineered by banks, in order to optimize their future consumption. This exercise shows that, even in the ideal case of perfect…
We study the high-frequency limits of strategies and costs in a Nash equilibrium for two agents that are competing to minimize liquidation costs in a discrete-time market impact model with exponentially decaying price impact and quadratic…
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…
Given the return series for a set of instruments, a \emph{trading strategy} is a switching function that transfers wealth from one instrument to another at specified times. We present efficient algorithms for constructing (ex-post) trading…
There is a pervasive assumption that low latency access to an exchange is a key factor in the profitability of many high-frequency trading strategies. This belief is evidenced by the "arms race" undertaken by certain financial firms to…
A point process for event arrivals in high frequency trading is presented. The intensity is the product of a Hawkes process and high dimensional functions of covariates derived from the order book. Conditions for stationarity of the process…
We use a deep neural network to generate controllers for optimal trading on high frequency data. For the first time, a neural network learns the mapping between the preferences of the trader, i.e. risk aversion parameters, and the optimal…
This paper investigates the optimal hedging strategies of an informed broker interacting with multiple traders in a financial market. We develop a theoretical framework in which the broker, possessing exclusive information about the drift…
We consider an optimal investment problem to maximize expected utility of the terminal wealth, in an illiquid market with search frictions and transaction costs. In the market model, an investor's attempt of transaction is successful only…
We compare optimal static and dynamic solutions in trade execution. An optimal trade execution problem is considered where a trader is looking at a short-term price predictive signal while trading. When the trader creates an instantaneous…
We consider a trading marketplace that is populated by traders with diverse trading strategies and objectives. The marketplace allows the suppliers to list their goods and facilitates matching between buyers and sellers. In return, such a…
We analyze the relation between earning forecast accuracy and expected profitability of financial analysts. Modeling forecast errors with a multivariate Gaussian distribution, a complete characterization of the payoff of each analyst is…
We study the problem of optimal trading using general alpha predictors with linear costs and temporary impact. We do this within the framework of stochastic optimization with finite horizon using both limit and market orders. Consistently…
We examine the dynamics of informational efficiency in a market with asymmetrically informed, boundedly rational traders who adaptively learn optimal strategies using simple multiarmed bandit (MAB) algorithms. The strategies available to…
Whether you trade futures for yourself or a hedge fund, your strategy is counted. Long and short position limits make the number of unique strategies finite. Formulas of the numbers of strategies, transactions, do nothing actions are…
Lead/lag relationships are an important stylized fact at high frequency. Some assets follow the path of others with a small time lag. We provide indicators to measure this phenomenon using tick-by-tick data. Strongly asymmetric…
Trading large volumes of a financial asset in order driven markets requires the use of algorithmic execution dividing the volume in many transactions in order to minimize costs due to market impact. A proper design of an optimal execution…
Financial market forecasting remains a formidable challenge despite the surge in computational capabilities and machine learning advancements. While numerous studies have underscored the precision of computer-generated market predictions,…
We study superreplication of European contingent claims in discrete time in a large trader model with market indifference prices recently proposed by Bank and Kramkov. We introduce a suitable notion of efficient friction in this framework,…
Order placement tactics play a crucial role in high-frequency trading algorithms and their design is based on understanding the dynamics of the order book. Using high quality high-frequency data and a set of microstructural features, we…