Related papers: VWAP execution and guaranteed VWAP
This paper introduces a new algorithmic execution model that integrates interbank limit and market orders with internal liquidity generated through market making. Based on the Cartea et al.\cite{cartea2015algorithmic} framework, we…
We study a model of auction design where a seller is selling a set of objects to a set of agents who can be assigned no more than one object. Each agent's preference over (object, payment) pair need not be quasilinear. If the domain…
To make medium- and long-term insurance products attractive, it is essential to enable participation in stock market returns. However, to eliminate downside risk, guarantees must be included, which naturally leads to the challenge of…
We generalize the Arbitrage Pricing Theory (APT) to include the contribution of virtual arbitrage opportunities. We model the arbitrage return by a stochastic process. The latter is incorporated in the APT framework to calculate the…
Market impact is an important problem faced by large institutional investor and active market participant. In this paper, we rigorously investigate whether price trajectory data from the metaorder increases the efficiency of estimation,…
We consider rate swaps which pay a fixed rate against a floating rate in presence of bid-ask spread costs. Even for simple models of bid-ask spread costs, there is no explicit strategy optimizing an expected function of the hedging error.…
Computing market equilibria is an important practical problem for market design, for example in fair division of items. However, computing equilibria requires large amounts of information (typically the valuation of every buyer for every…
The classical literature on optimal liquidation, rooted in Almgren-Chriss models, tackles the optimal liquidation problem using a trade-off between market impact and price risk. Therefore, it only answers the general question of the optimal…
Calculation of an optimal tariff is a principal challenge for pricing actuaries. In this contribution we are concerned with the renewal insurance business discussing various mathematical aspects of calculation of an optimal renewal tariff.…
We assume a continuous-time price impact model similar to Almgren-Chriss but with the added assumption that the price impact parameters are stochastic processes modeled as correlated scalar Markov diffusions. In this setting, we develop…
We examine the trade-off between the provision of incentives to exert costly effort (ex-ante moral hazard) and the incentives needed to prevent the agent from manipulating the profit observed by the principal (ex-post moral hazard).…
We introduce a two-agent problem which is inspired by price asymmetry arising from funding difference. When two parties have different funding rates, the two parties deduce different fair prices for derivative contracts even under the same…
We study an equilibrium-based continuous asset pricing problem for the securities market. In the previous work [16], we have shown that a certain price process, which is given by the solution to a forward backward stochastic differential…
This paper studies a valuation framework for financial contracts subject to reference and counterparty default risks with collateralization requirement. We propose a fixed point approach to analyze the mark-to-market contract value with…
We consider the problem of portfolio optimization in the presence of market impact, and derive optimal liquidation strategies. We discuss in detail the problem of finding the optimal portfolio under Expected Shortfall (ES) in the case of…
We present a mathematical formulation of liquidity provision in decentralized exchanges. We focus on constant function market makers of utility indifference type, which include constant product market makers with concentrated liquidity as a…
We develop two alternate approaches to arbitrage-free, market-complete, option pricing. The first approach requires no riskless asset. We develop the general framework for this approach and illustrate it with two specific examples. The…
The literature on volatility modelling and option pricing is a large and diverse area due to its importance and applications. This paper provides a review of the most significant volatility models and option pricing methods, beginning with…
Automated market makers with concentrated liquidity capabilities are programmable at the tick level. The maximization of earned fees, plus depreciated reserves, is a convex optimization problem whose vector solution gives the best provision…
We consider an agent who needs to buy (or sell) a relatively small amount of asset over some fixed short time interval. We work at the highest frequency meaning that we wish to find the optimal tactic to execute our quantity using limit…