Related papers: An Optimal Pairs-Trading Rule
We propose a reinforcement learning (RL) approach to model optimal exercise strategies for option-type products. We pursue the RL avenue in order to learn the optimal action-value function of the underlying stopping problem. In addition to…
Traders and investors involved in an option contract having the underlying stock in range bound are likely to lose their initial investment. Timing in buying an option contract is of capital importance. In a recent article [1] the…
This paper studies the equilibrium price of an asset that is traded in continuous time between N agents who have heterogeneous beliefs about the state process underlying the asset's payoff. We propose a tractable model where agents maximize…
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…
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…
We study the problem of option replication under constant proportional transaction costs in models where stochastic volatility and jumps are combined to capture the market's important features. Assuming some mild condition on the jump size…
The goal of this study is to explain and examine the statistical underpinnings of the Bollinger Band methodology. We start off by elucidating the rolling regression time series model and deriving its explicit relationship to Bollinger…
An optimal control problem is considered for a stochastic differential equation containing a state-dependent regime switching, with a recursive cost functional. Due to the non-exponential discounting in the cost functional, the problem is…
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…
Aiming to analyze the impact of environmental transition on the value of assets and on asset stranding, we study optimal stopping and divestment timing decisions for an economic agent whose future revenues depend on the realization of a…
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 present a mathematical model of a market with $m$ shares traded across $n$ investor groups, each one with similar motivations and trading strategies. The market of each asset consists of a fixed amount of cash and shares (no additions…
We compare optimal static and dynamic solutions in trade execution. An optimal trade execution problem is considered where a trader is looking at a short-term price predictive signal while trading. When the trader creates an instantaneous…
We study the bilateral trade problem: one seller, one buyer and a single, indivisible item for sale. It is well known that there is no fully-efficient and incentive compatible mechanism for this problem that maintains a balanced budget. We…
In this paper, we study the optimal stopping problem in the so-called exploratory framework, in which the agent takes actions randomly conditioning on current state and an entropy-regularized term is added to the reward functional. Such a…
Optimal stopping is the problem of deciding when to stop a stochastic system to obtain the greatest reward, arising in numerous application areas such as finance, healthcare and marketing. State-of-the-art methods for high-dimensional…
Evolutions of the trading landscape lead to the capability to exchange the same financial instrument on different venues. Because of liquidity issues, the trading firms split large orders across several trading destinations to optimize…
To execute a trade, participants in electronic equity markets may choose to submit limit orders or market orders across various exchanges where a stock is traded. This decision is influenced by the characteristics of the order flow and…
In this article we consider combinatorial markets with valuations only for singletons and pairs of buy/sell-orders for swapping two items in equal quantity. We provide an algorithm that permits polynomial time market-clearing and -pricing.…
We study the problem of dynamically trading multiple futures whose underlying asset price follows a multiscale central tendency Ornstein-Uhlenbeck (MCTOU) model. Under this model, we derive the closed-form no-arbitrage prices for the…