Related papers: Optimal Trading with Linear Costs
In this paper, we consider a stochastic recursive optimal control problem under model uncertainty. In this framework, the cost function is described by solutions of a family of backward stochastic differential equations. With the help of…
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…
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…
We study an optimal dividend problem under a bankruptcy constraint. Firms face a trade-off between potential bankruptcy and extraction of profits. In contrast to previous works, general cash flow drifts, including Ornstein--Uhlenbeck and…
We study optimal investment in a financial market having a finite number of assets from a signal processing perspective. We investigate how an investor should distribute capital over these assets and when he should reallocate the…
This paper concerns the numerical solution of a fully nonlinear parabolic double obstacle problem arising from a finite portfolio selection with proportional transaction costs. We consider the optimal allocation of wealth among multiple…
We consider how to use the Bellman residual of the dynamic programming operator to compute suboptimality bounds for solutions to stochastic shortest path problems. Such bounds have been previously established only in the special case that…
We study the problem of the optimal execution of a large trade in the presence of nonlinear transient impact. We propose an approach based on homotopy analysis, whereby a well behaved initial strategy is continuously deformed to lower the…
In this paper we consider long-run risk sensitive average cost impulse control applied to a continuous-time Feller-Markov process. Using the probabilistic approach, we show how to get a solution to a suitable continuous-time Bellman…
In this paper we consider a pairs trading financial market with the spread of risky assets defined by the Ornstein-Uhlenbeck (OU) process. We implement an optimal strategy for power utility functions for investment/consumption problem.…
This paper studies the problem of determining the optimal cut-off for pairs trading rules. We consider two correlated assets whose spread is modelled by a mean-reverting process with stochastic volatility, and the optimal pair trading rule…
In this work we study a continuous time exponential utility maximization problem in the presence of a linear temporary price impact. More precisely, for the case where the risky asset is given by the Ornstein-Uhlenbeck diffusion process we…
The aim of this paper is to compare the performances of the optimal strategy under parameters mis-specification and of a technical analysis trading strategy. The setting we consider is that of a stochastic asset price model where the trend…
We investigate the optimal strategy over a finite time horizon for a portfolio of stock and bond and a derivative in an multiplicative Markovian market model with transaction costs (friction). The optimization problem is solved by a…
We study a sequential coin-flipping game in which a player starts with~$n$ coins, each landing heads independently with probability~$p$. In each round the player flips all remaining coins and must set aside at least one coin showing heads;…
An approximation method for construction of optimal strategies in the bid \& ask limit order book in the high-frequency trading (HFT) is studied. The basis is the article by M. Avellaneda \& S. Stoikov 2008, in which certain seemingly…
Minimizing execution costs for large orders is a fundamental challenge in finance. Firms often depend on brokers to manage their trades due to limited internal resources for optimizing trading strategies. This paper presents a methodology…
Bilateral trade models the task of intermediating between two strategic agents, a seller and a buyer, willing to trade a good for which they hold private valuations. We study this problem from the perspective of a broker, in a regret…
In financial markets, liquidity is not constant over time but exhibits strong seasonal patterns. In this article we consider a limit order book model that allows for time-dependent, deterministic depth and resilience of the book and…
Recent work [Ran22] formulated a class of optimal control problems involving positive linear systems, linear stage costs, and elementwise constraints on control. It was shown that the problem admits linear optimal cost and the associated…