Related papers: Transaction Costs, Shadow Prices, and Duality in D…
We study the optimal portfolio liquidation problem over a finite horizon in a limit order book with bid-ask spread and temporary market price impact penalizing speedy execution trades. We use a continuous-time modeling framework, but in…
This paper proposes a novel model of financial prices where: (i) prices are discrete; (ii) prices change in continuous time; (iii) a high proportion of price changes are reversed in a fraction of a second. Our model is analytically…
We study sequential bilateral trade where sellers and buyers valuations are completely arbitrary (i.e., determined by an adversary). Sellers and buyers are strategic agents with private valuations for the good and the goal is to design a…
Trading frictions are stochastic. They are, moreover, in many instances fast-mean reverting. Here, we study how to optimally trade in a market with stochastic price impact and study approximations to the resulting optimal control problem…
Transaction fees represent a major incentive in many blockchain systems as a way to incentivize processing transactions. Unfortunately, they also introduce an enormous amount of incentive asymmetry compared to alternatives like fixed block…
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,…
We study optimal liquidation in the presence of linear temporary and transient price impact along with taking into account a general price predicting finite-variation signal. We formulate this problem as minimization of a cost-risk…
In the paper we study markets with concave transaction costs which depend in a concave way on the volume of transaction. This is typical situation in the case of small investors, which commonly appears in currency and real estate markets.…
We revisit the optimal investment and consumption problem with proportional transaction costs. We prove that both the value function and the slopes of the lines demarcating the no-trading region are analytic functions of cube root of the…
The paper studies sub and super-replication price bounds for contingent claims defined on general trajectory based market models. No prior probabilistic or topological assumptions are placed on the trajectory space, trading is assumed to…
Using Trades and Quotes data from the Paris stock market, we show that the random walk nature of traded prices results from a very delicate interplay between two opposite tendencies: long-range correlated market orders that lead to…
We investigate pricing-hedging duality for American options in discrete time financial models where some assets are traded dynamically and others, e.g. a family of European options, only statically. In the first part of the paper we…
Motivated by applications to bond markets, we propose a multivariate framework for discrete time financial markets with proportional transaction costs and a countable infinite number of tradable assets. We show that the no-arbitrage of…
We analyze the optimal dividend payment problem in the dual model under constant transaction costs. We show, for a general spectrally positive L\'{e}vy process, an optimal strategy is given by a $(c_1,c_2)$-policy that brings the surplus…
We propose a continuous time model for financial markets with proportional transactions costs and a continuum of risky assets. This is motivated by bond markets in which the continuum of assets corresponds to the continuum of possible…
This study investigates an optimal consumption--investment problem in which the unobserved stock trend is modulated by a hidden Markov chain that represents different economic regimes. In the classical approach, the hidden state is…
This paper considers the optimal portfolio selection problem in a dynamic multi-period stochastic framework with regime switching. The risk preferences are of exponential (CARA) type with an absolute coefficient of risk aversion which…
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…
This paper concerns the design of a Fourier based pseudospectral numerical method for the model of European Option Pricing with transaction costs under Exponential Utility derived by Davis, Panas and Zariphopoulou. Computing the option…
We study the problem of maximising terminal utility for an agent facing model uncertainty, in a frictionless discrete-time market with one safe asset and finitely many risky assets. We show that an optimal investment strategy exists if the…