Related papers: An Optimal Pairs-Trading Rule
American options are studied in a general discrete market in the presence of proportional transaction costs, modelled as bid-ask spreads. Pricing algorithms and constructions of hedging strategies, stopping times and martingale…
We consider the bilateral trade problem, in which two agents trade a single indivisible item. It is known that the only dominant-strategy truthful mechanism is the fixed-price mechanism: given commonly known distributions of the buyer's…
People are often reluctant to sell a house, or shares of stock, below the price at which they originally bought it. While this is generally not consistent with rational utility maximization, it does reflect two strong empirical regularities…
We consider a controlled double-ended queue consisting of two classes of customers, labeled sellers and buyers. The sellers and buyers arrive in a trading market according to two independent renewal processes. Whenever there is a seller and…
Although there is a wide use of technical trading rules in stock markets, the profitability of them still remains controversial. This paper first presents and proves the upper bound of cumulative return, and then introduces many of…
We propose a novel group of Gaussian Process based algorithms for fast approximate optimal stopping of time series with specific applications to financial markets. We show that structural properties commonly exhibited by financial time…
This paper presents a simple method for a posteriori (historical) multi-variate multi-stage optimal trading under transaction costs and a diversification constraint. Starting from a given amount of money in some currency, we analyze the…
A dynamic bipartite matching model is given by a bipartite matching graph which determines the possible matchings between the various types of supply and demand items. Both supply and demand items arrive to the system according to a…
A trading system is said to be {robust} if it generates a robust return regardless of market direction. To this end, a consistently positive expected trading gain is often used as a robustness metric for a trading system. In this paper, we…
We deal with the optimal execution problem when the broker's goal is to reach a performance barrier avoiding a downside barrier. The performance is provided by the wealth accumulated by trading in the market, the shares detained by the…
The problem of portfolio allocation in the context of stocks evolving in random environments, that is with volatility and returns depending on random factors, has attracted a lot of attention. The problem of maximizing a power utility at a…
We consider a new type of optimal stopping problems where the absorbing boundary moves as the state process X attains new maxima S. More specifically, we set the absorbing boundary as S-b where b is a certain constant. This problem is…
We consider the multi-period portfolio optimization problem with a single asset that can be held long or short. Due to the presence of transaction costs, maximizing the immediate reward at each period may prove detrimental, as frequent…
In this report, we talked about a new quantitative strategy for choosing the optimal(s) stock(s) to trade. The basic notions are generally very known by the financial community. The key here is to understand 1) the standard score applied to…
We consider the problem of maximizing portfolio value when an agent has a subjective view on asset value which differs from the traded market price. The agent's trades will have a price impact which affect the price at which the asset is…
The problem of convergence in law of normed sums of exchangeable random variables is examined. First, the problem is studied w.r.t. arrays of exchangeable random variables, and the special role played by mixtures of products of stable laws…
\begin{abstract} In this paper, we integrated the statistical arbitrage strategy, pairs trading, into the Black-Litterman model and constructed efficient mean-variance portfolios. Typically, pairs trading underperforms under volatile or…
In this article we study a multi-asset version of the Merton investment and consumption problem with proportional transaction costs. In general it is difficult to make analytical progress towards a solution in such problems, but we…
An advantageous feature of piecewise constant policy timestepping for Hamilton-Jacobi-Bellman (HJB) equations is that different linear approximation schemes, and indeed different meshes, can be used for the resulting linear equations for…
Collective behaviours taking place in financial markets reveal strongly correlated states especially during a crisis period. A natural hypothesis is that trend reversals are also driven by mutual influences between the different stock…