Related papers: Optimal Trading with Linear Costs
We consider the problem of determining an optimal strategy for electricity injection that faces an uncertain power demand stream. This demand stream is modeled via an Ornstein-Uhlenbeck process with an additional jump component, whereas the…
We study an optimal portfolio problem designed for an agent operating in intraday electricity markets. The investor is allowed to trade in a single risky asset modelling the continuously traded power and aims to maximize the expected…
We give a complete solution to the problem of minimizing the expected liquidity costs in presence of a general drift when the underlying market impact model has linear transient price impact with exponential resilience. It turns out that…
Alpha signals for statistical arbitrage strategies are often driven by latent factors. This paper analyses how to optimally trade with latent factors that cause prices to jump and diffuse. Moreover, we account for the effect of the trader's…
Navigating a collision-free and optimal trajectory for a robot is a challenging task, particularly in environments with moving obstacles such as humans. We formulate this problem as a stochastic optimal control problem. Since solving the…
We present a method for optimal control with respect to a linear cost function for positive linear systems with coupled input constraints. We show that the optimal cost function and resulting sparse state feedback for these systems can be…
This paper introduces a novel methodology for the pricing and management of share buyback contracts, overcoming the limitations of traditional optimal control methods, which frequently encounter difficulties with high-dimensional state…
In this research, we develop a trading strategy for the discrete-time optimal liquidation problem of large order trading with different market microstructures in an illiquid market. In this framework, the flow of orders can be viewed as a…
In this article we study an optimal stopping/optimal control problem which models the decision facing a risk-averse agent over when to sell an asset. The market is incomplete so that the asset exposure cannot be hedged. In addition to the…
Assuming that the stock price $Z=(Z_t)_{0\leq t\leq T}$ follows a geometric Brownian motion with drift $\mu\in\mathbb{R}$ and volatility $\sigma>0$, and letting $M_t=\max_{0\leq s\leq t}Z_s$ for $t\in[0,T]$, we consider the optimal…
We are concerned with optimal control strategies subject to uncertain demands. An Ornstein-Uhlenbeck process describes the uncertain demand. The transport within the supply system is modeled by the linear advection equation. We consider…
We formulate and solve an optimal trading problem with alpha signals, where transactions induce a nonlinear transient price impact described by a general propagator model, including power-law decay. Using a variational approach, we…
We propose a framework to study optimal trading policies in a one-tick pro-rata limit order book, as typically arises in short-term interest rate futures contracts. The high-frequency trader has the choice to trade via market orders or…
We consider the problem of option hedging in a market with proportional transaction costs. Since super-replication is very costly in such markets, we replace perfect hedging with an expected loss constraint. Asymptotic analysis for small…
We consider a broker who has to place a large order which consumes a sizable part of average daily trading volume. The broker's aim is thus to minimize execution costs he incurs from the adverse impact of his trades on market prices. By…
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…
The aim of this short note is to establish a limit theorem for the optimal trading strategies in the setup of the utility maximization problem with proportional transaction costs. This limit theorem resolves the open question from [4]. The…
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 the optimal trade execution strategies for a large portfolio of single stocks proposed by Almgren (2003). This framework accounts for a nonlinear impact of trades on average market prices. The results of Almgren (2003) are based…
We investigate the portfolio execution problem under a framework in which volatility and liquidity are both uncertain. In our model, we assume that a multidimensional Markovian stochastic factor drives both of them. Moreover, we model…