Related papers: Mean Reversion Pays, but Costs
Financial markets across all asset classes are known to exhibit trends. These trends have been exploited by traders for decades. Here, we empirically measure when trends revert, based on 30 years of daily futures prices for equity indices,…
Hanson's market scoring rules allow us to design a prediction market that still gives useful information even if we have an illiquid market with a limited number of budget-constrained agents. Each agent can "move" the current price of a…
This paper derives a robust on-line equity trading algorithm that achieves the greatest possible percentage of the final wealth of the best pairs rebalancing rule in hindsight. A pairs rebalancing rule chooses some pair of stocks in the…
In this paper, asymptotic results in a long-term growth rate portfolio optimization model under both fixed and proportional transaction costs are obtained. More precisely, the convergence of the model when the fixed costs tend to zero is…
An investor trades a safe and several risky assets with linear price impact to maximize expected utility from terminal wealth. In the limit for small impact costs, we explicitly determine the optimal policy and welfare, in a general…
In this paper we consider a discrete-time risk sensitive portfolio optimization over a long time horizon with proportional transaction costs. We show that within the log-return i.i.d. framework the solution to a suitable Bellman equation…
We investigate approximately optimal mechanisms in settings where bidders' utility functions are non-linear; specifically, convex, with respect to payments (such settings arise, for instance, in procurement auctions for energy). We provide…
The rapid growth of the stock market has attracted many investors due to its potential for significant profits. However, predicting stock prices accurately is difficult because financial markets are complex and constantly changing. This is…
In this paper, we investigate the optimization of mutual proportional reinsurance --- a mutual reserve system that is intended for the collective reinsurance needs of homogeneous mutual members, such as P&I Clubs in marine mutual insurance…
Value adjustment of uncollateralized trades is determined within a risk-neutral pricing framework. When hedging such trades, investors cannot freely trade protection on their own name, thus facing an incomplete market. This fact is…
We consider the problem of a single seller repeatedly selling a single item to a single buyer (specifically, the buyer has a value drawn fresh from known distribution $D$ in every round). Prior work assumes that the buyer is fully rational…
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…
A speculative agent with Prospect Theory preference chooses the optimal time to purchase and then to sell an indivisible risky asset to maximize the expected utility of the round-trip profit net of transaction costs. The optimization…
Regression plays a key role in many research areas and its variable selection is a classic and major problem. This study emphasizes cost of predictors to be purchased for future use, when we select a subset of them. Its economic aspect is…
We propose a new method for finding statistical arbitrages that can contain more assets than just the traditional pair. We formulate the problem as seeking a portfolio with the highest volatility, subject to its price remaining in a band…
We propose a novel method to improve estimation of asset returns for portfolio optimization. This approach first performs a monthly directional market forecast using an online decision tree. The decision tree is trained on a novel set of…
Buying or selling assets leads to transaction costs for the investor. On one hand, it is well know to all market practionaires that the transaction costs are positive on average and present therefore systematic loss. On the other hand, for…
The inverse optimal transport problem is to find the underlying cost function from the knowledge of optimal transport plans. While this amounts to solving a linear inverse problem, in this work we will be concerned with the nonlinear…
We consider the Brownian market model and the problem of expected utility maximization of terminal wealth. We, specifically, examine the problem of maximizing the utility of terminal wealth under the presence of transaction costs of a…
In the matroid buyback problem, an algorithm observes a sequence of bids and must decide whether to accept each bid at the moment it arrives, subject to a matroid constraint on the set of accepted bids. Decisions to reject bids are…