Related papers: An Optimal Pairs-Trading Rule
In this paper, we study a free boundary problem, which arises from an optimal trading problem of a stock that is driven by a uncertain market status process. The free boundary problem is a variational inequality system of three functions…
In this paper, we introduce a novel, non-recursive, maximal matching algorithm for double auctions, which aims to maximize the amount of commodities to be traded. It differs from the usual equilibrium matching, which clears a market at the…
Stop-loss rules are often studied in the financial literature, but the stop-loss levels are seldom constructed systematically. In many papers, and indeed in practice as well, the level of the stops is too often set arbitrarily. Guided by…
This paper studies four trading algorithms of a professional trader at a multilateral trading facility, observing a realistic two-sided limit order book whose dynamics are driven by the order book events. The identity of the trader can be…
Pair trading is one of the most discussed topics among financial researches. Despite a growing base of work, portfolio management for multivariate time series is rarely discussed. On the other hand, most researches focus on refining…
We extend the framework of trading strategies of Gatheral [2010] from single stocks to a pair of stocks. Our trading strategy with the executions of two round-trip trades can be described by the trading rates of the paired stocks and the…
This paper considers time-inconsistent problems when control and stopping strategies are required to be made simultaneously (called stopping control problems by us). We first formulate the timeinconsistent stopping control problems under…
We study the problem of dynamically trading futures in a regime-switching market. Modeling the underlying asset price as a Markov-modulated diffusion process, we present a utility maximization approach to determine the optimal futures…
An unconventional approach for optimal stopping under model ambiguity is introduced. Besides ambiguity itself, we take into account how ambiguity-averse an agent is. This inclusion of ambiguity attitude, via an $\alpha$-maxmin nonlinear…
We extend the QLBS model by reformulating via considering a large trader whose transactions leave a permanent impact on the evolution of the exchange rate process and therefore affect the price of contingent claims on such processes.…
Optimal control models for limit order trading often assume that the underlying asset price is a Brownian motion since they deal with relatively short time scales. The resulting optimal bid and ask limit order prices tend to track the…
The purpose of these notes is to provide a systematic quantitative framework - in what is intended to be a "pedagogical" fashion - for discussing mean-reversion and optimization. We start with pair trading and add complexity by following…
This research aims to demonstrate a dynamic cointegration-based pairs trading strategy, including an optimal look-back window framework in the cryptocurrency market, and evaluate its return and risk by applying three different scenarios. We…
We study the problem of dynamically trading a futures contract and its underlying asset under a stochastic basis model. The basis evolution is modeled by a stopped scaled Brownian bridge to account for non-convergence of the basis at…
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…
This paper studies the problem of trading futures with transaction costs when the underlying spot price is mean-reverting. Specifically, we model the spot dynamics by the Ornstein-Uhlenbeck (OU), Cox-Ingersoll-Ross (CIR), or exponential…
In this paper we study simulation based optimization algorithms for solving discrete time optimal stopping problems. This type of algorithms became popular among practioneers working in the area of quantitative finance. Using large…
We consider an optimal trading problem over a finite period of time during which an investor has access to both a standard exchange and a dark pool. We take the exchange to be an order-driven market and propose a continuous-time setup for…
We propose a new method for finding statistical arbitrages that can contain more assets than just the traditional pair. We formulate the problem as seeking a portfolio with the highest volatility, subject to its price remaining in a band…
We introduce a novel approach to options trading strategies using a highly scalable and data-driven machine learning algorithm. In contrast to traditional approaches that often require specifications of underlying market dynamics or…