Related papers: Large tick assets: implicit spread and optimal tic…
It is known that the impact of transactions on stock price (market impact) is a concave function of the size of the order, but there exists little quantitative theory that suggests why this is so. I develop a quantitative theory for the…
This paper examines effects of MiFID II on European stock markets. We study the effects of the new tick size regime, both intraday and in the closing auction. An increase (decrease) in tick size is associated with a decrease (increase) in…
Will a new smartphone application diffuse deeply in the population or will it sink into oblivion soon? To predict this, we argue that common models of spread of innovations based on cascade dynamics or epidemics may not be fully adequate.…
This note studies the behavior of an index I_t which is assumed to be a tradable security, to satisfy the BSM model dI_t/I_t = \mu dt + \sigma dW_t, and to be efficient in the following sense: we do not expect a prespecified trading…
In this short note, we will show how to optimize the portfolio of a large trader whose hedging strategy affects the price of his assets.
We show that the cost of market orders and the profit of infinitesimal market-making or -taking strategies can be expressed in terms of directly observable quantities, namely the spread and the lag-dependent impact function. Imposing that…
In a fixed time horizon, appropriately executing a large amount of a particular asset -- meaning a considerable portion of the volume traded within this frame -- is challenging. Especially for illiquid or even highly liquid but also highly…
In order to investigate the origin of large price fluctuations, we analyze stock price changes of ten frequently traded NASDAQ stocks in the year 2002. Though the influence of the trading frequency on the aggregate return in a certain time…
We consider an optimal consumption/investment problem to maximize expected utility from consumption. In this market model, the investor is allowed to choose a portfolio which consists of one bond, one liquid risky asset (no transaction…
We propose a framework to study the optimal liquidation strategy in a limit order book for large-tick stocks, with spread equal to one tick. All order book events (market orders, limit orders and cancellations) occur according to…
Interatomic potentials are essential to go beyond ab initio size limitations, but simulation results depend sensitively on potential parameters. Forward propagation of parameter variation is key for uncertainty quantification, whilst…
In this work, we study a dynamic portfolio optimization problem related to pairs trading, which is an investment strategy that matches a long position in one security with a short position in another security with similar characteristics.…
Market Microstructure is the investigation of the process and protocols that govern the exchange of assets with the objective of reducing frictions that can impede the transfer. In financial markets, where there is an abundance of recorded…
Financial markets show a number of non-stationarities, ranging from volatility fluctuations over ever changing technical and regulatory market conditions to seasonalities. On the other hand, financial markets show various stylized facts…
A small investor provides liquidity at the best bid and ask prices of a limit order market. For small spreads and frequent orders of other market participants, we explicitly determine the investor's optimal policy and welfare. In doing so,…
In this work, we study the correlation between attribute sets and the occurrence of dense subgraphs in large attributed graphs, a task we call structural correlation pattern mining. A structural correlation pattern is a dense subgraph…
Macroscopic properties of equity markets affect the performance of active equity strategies but many are not adequately captured by conventional models of financial mathematics and econometrics. Using the CRSP Database of the US equity…
This paper studies arbitrage pricing theory in financial markets with implicit transaction costs. We extend the existing theory to include the more realistic possibility that the price at which the investors trade is dependent on the traded…
Optimal B-robust estimate is constructed for multidimensional parameter in drift coefficient of diffusion type process with small noise. Optimal mean-variance robust (optimal V -robust) trading strategy is find to hedge in mean-variance…
A great deal of academic and theoretical work has been dedicated to optimal liquidation of large orders these last twenty years. The optimal split of an order through time (`optimal trade scheduling') and space (`smart order routing') is of…