Related papers: An Optimal Execution Problem with a Geometric Orns…
We build an optimal portfolio liquidation model for OTC markets, aiming at minimizing the trading costs via the choice of the liquidation time. We work in the Locally Linear Order Book framework of \cite{toth2011anomalous} to obtain the…
Most energy and commodity markets exhibit mean-reversion and occasional distinctive price spikes, which results in demand for derivative products which protect the holder against high prices. To this end, in this paper we present exact and…
Optimal execution, i.e., the determination of the most cost-effective way to trade volumes in continuous trading sessions, has been a topic of interest in the equity trading world for years. Electricity intraday trading slowly follows this…
This paper is concerned with the problem of finding the optimal of extraction policies of an oil field in light of various financial and economical restrictions and constraints. Taking into account the fact that the oil price in worldwide…
In this paper, we study the optimal investment problem of an insurer whose surplus process follows the diffusion approximation of the classical Cramer-Lundberg model. Investment in the foreign market is allowed, and therefore, the foreign…
We study a single risky financial asset model subject to price impact and transaction cost over an infinite horizon. An investor needs to execute a long position in the asset affecting the price of the asset and possibly incurring in fixed…
This paper studies the optimal liquidation of stocks in the presence of temporary and permanent price impacts, and we focus in the case of cryptocurrencies. We start by presenting analytical solutions to the problem with linear temporary…
In this paper we address the problem of optimal liquidation of a large portfolio composed by securities exposed to default risk. The default time is described in terms of a Brownian motion representing the evolution of the value of the…
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…
We develop a new market-making model, from the ground up, which is tailored towards high-frequency trading under a limit order book (LOB), based on the well-known classification of order types in market microstructure. Our flexible…
This paper is devoted to invest an optimal investment strategy for a defined-contribution (DC) pension plan under the Ornstein-Uhlenbeck (O-U) process and the loan. By considering risk-free asset, a risky asset driven by O-U process and a…
This paper studies convergence properties of optimal values and actions for discounted and average-cost Markov Decision Processes (MDPs) with weakly continuous transition probabilities and applies these properties to the stochastic…
In this paper we propose a dynamic model of Limit Order Book (LOB). The main feature of our model is that the shape of the LOB is determined endogenously by an expected utility function via a competitive equilibrium argument. Assuming zero…
The Ornstein-Uhlenbeck process is interpreted as Brownian motion in a harmonic potential. This Gaussian Markov process has a bounded variance and admits a stationary probability distribution, in contrast to the standard Brownian motion. It…
Bertsimas and Lo's seminal work laid the groundwork for addressing the implementation shortfall dilemma in institutional investing, emphasizing the significance of market microstructure and price dynamics in minimizing execution costs.…
We calculate explicitly the optimal strategy for an investor with exponential utility function when the stock price follows an autoregressive Gaussian process. We also calculate its performance and analyse it when the trading horizon tends…
Optimal execution in financial markets refers to the process of strategically transacting a large volume of assets over a period to achieve the best possible outcome by balancing the trade-off between market impact costs and timing or…
This paper studies the ubiquitous problem of liquidating large quantities of highly correlated stocks, a task frequently encountered by institutional investors and proprietary trading firms. Traditional methods in this setting suffer from…
We propose a framework for studying optimal market making policies in a limit order book (LOB). The bid-ask spread of the LOB is modelled by a Markov chain with finite values, multiple of the tick size, and subordinated by the Poisson…
Mathematically, the execution of an American-style financial derivative is commonly reduced to solving an optimal stopping problem. Breaking the general assumption that the knowledge of the holder is restricted to the price history of the…