Related papers: High-frequency market-making for multi-dimensional…
A market with defaultable bonds where the bond dynamics is in a Heath-Jarrow-Morton setting and the forward rates are driven by an infinite number of Levy factors is considered. The setting includes rating migrations driven by a Markov…
In this paper, we consider Markov Decision Processes (MDPs) with error states. Error states are those states entering which is undesirable or dangerous. We define the risk with respect to a policy as the probability of entering such a state…
We design a prediction market to recover a complete and fully general probability distribution over a random variable. Traders buy and sell interval securities that pay \$1 if the outcome falls into an interval and \$0 otherwise. Our market…
This paper introduces a jump-diffusion pricing model specifically designed for algorithmic trading and high-frequency trading (HFT). The model incorporates independent jump and diffusion processes, providing a more precise representation of…
We consider a stochastic inventory control problem under censored demands, lost sales, and positive lead times. This is a fundamental problem in inventory management, with significant literature establishing near-optimality of a simple…
In this paper we present a hierarchical multi-rate control architecture for nonlinear autonomous systems operating in partially observable environments. Control objectives are expressed using syntactically co-safe Linear Temporal Logic…
Key challenges in the analysis of highly multivariate large-scale spatial stochastic processes, where both the number of components (p) and spatial locations (n) can be large, include achieving maximal sparsity in the joint precision…
Large tick assets, i.e. assets where one tick movement is a significant fraction of the price and bid-ask spread is almost always equal to one tick, display a dynamics in which price changes and spread are strongly coupled. We introduce a…
We study optimal trade execution with a hard-zero terminal inventory constraint, modeled via Hamilton-Jacobi-Bellman (HJB) equations. Vanilla PINNs often under-enforce this constraint and produce unstable controls. We propose a…
In this paper, we first conduct a study of the portfolio selection problem, incorporating both exogenous (proportional) and endogenous (resulting from liquidity risk, characterized by a stochastic process) transaction costs through the…
This article investigates a regime-switching investment strategy aimed at mitigating downside risk by reducing market exposure during anticipated unfavorable market regimes. We highlight the statistical jump model (JM) for market regime…
This paper studies the optimal investment problem with random endowment in an inventory-based price impact model with competitive market makers. Our goal is to analyze how price impact affects optimal policies, as well as both pricing rules…
In the over-the-counter market in derivatives, we sometimes see large numbers of traders taking the same position and risk. When there is this kind of concentration in the market, the position impacts the pricings of all other derivatives…
The objective of this work is to study continuous-time Markov decision processes on a general Borel state space with both impulsive and continuous controls for the infinite-time horizon discounted cost. The continuous-time controlled…
The aim of this paper is to investigate risk-averse and distributionally robust modeling of Stochastic Optimal Control (SOC) and Markov Decision Process (MDP). We discuss construction of conditional nested risk functionals, a particular…
We propose and experimentally demonstrate an innovative stock index prediction method using a weighted optical reservoir computing system. We construct fundamental market data combined with macroeconomic data and technical indicators to…
This paper studies stochastic control problems motivated by optimal consumption with wealth benchmark tracking. The benchmark process is modeled by a combination of a geometric Brownian motion and a running maximum process, indicating its…
In this paper, we study the dividend strategies for a shareholder with non-constant discount rate in a diffusion risk model. We assume that the dividends can only be paid at a bounded rate and restrict ourselves to the Markov strategies.…
The paper proposes a new stochastic intervention control model conducted in various commodity and stock markets. The essence of the phenomenon of intervention is described in accordance with current economic theory. A review of papers on…
With the increasing integration of power plants into the frequency-regulation markets, the importance of optimal trading has grown substantially. This paper conducts an in-depth analysis of their optimal trading behavior in sequential…