Related papers: Smooth solutions to portfolio liquidation problems…
We consider an illiquid financial market where a risk averse investor has to liquidate a portfolio within a finite time horizon [0,T] and can trade continuously at a traditional exchange (the "primary venue") and in a dark pool. At the…
The classical optimal trading problem is the closure of a position in an asset over a time interval; the trader maximizes an expected utility under the constraint that the position be fully closed by terminal time. Since the asset price is…
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…
In this research, we develop a trading strategy for the discrete-time optimal liquidation problem of large order trading with different market microstructures in an illiquid market. In this framework, the flow of orders can be viewed as a…
We study an optimal liquidation problem under the ambiguity with respect to price impact parameters. Our main results show that the value function and the optimal trading strategy can be characterized by the solution to a semi-linear PDE…
Traders are often faced with large block orders in markets with limited liquidity and varying volatility. Executing the entire order at once usually incurs a large trading cost because of this limited liquidity. In order to minimize this…
We introduce a price impact model which accounts for finite market depth, tightness and resilience. Its coupled bid- and ask-price dynamics induce convex liquidity costs. We provide existence of an optimal solution to the classical problem…
We study an optimal execution problem in illiquid markets with both instantaneous and persistent price impact and stochastic resilience when only absolutely continuous trading strategies are admissible. In our model the value function can…
Incomplete financial markets are considered, defined by a multi-dimensional non-homogeneous diffusion process, being the direct sum of an It\^{o} process (the price process), and another non-homogeneous diffusion process (the exogenous…
We study a constrained stochastic control problem with jumps; the jump times of the controlled process are given by a Poisson process. The cost functional comprises quadratic components for an absolutely continuous control and the…
We consider an optimal liquidation problem with instantaneous price impact and stochastic resilience for small instantaneous impact factors. Within our modelling framework, the optimal portfolio process converges to the solution of an…
We consider a finite-horizon market-making problem faced by a dark pool that executes incoming buy and sell orders. The arrival flow of such orders is assumed to be random and, for each transaction, the dark pool earns a per-share…
We study a single risky financial asset model subject to price impact and transaction cost over an finite time horizon. An investor needs to execute a long position in the asset affecting the price of the asset and possibly incurring in…
In this paper we study an optimal portfolio selection problem under instantaneous price impact. Based on some empirical analysis in the literature, we model such impact as a concave function of the trading size when the trading size is…
We apply numerical dynamic programming techniques to solve discrete-time multi-asset dynamic portfolio optimization problems with proportional transaction costs and shorting/borrowing constraints. Examples include problems with multiple…
Empirical studies indicate the presence of multi-scales in the volatility of underlying assets: a fast-scale on the order of days and a slow-scale on the order of months. In our previous works, we have studied the portfolio optimization…
We consider an investor facing a classical portfolio problem of optimal investment in a log-Brownian stock and a fixed-interest bond, but constrained to choose portfolio and consumption strategies that reduce a dynamic shortfall risk…
We study optimal liquidation in the presence of linear temporary and transient price impact along with taking into account a general price predicting finite-variation signal. We formulate this problem as minimization of a cost-risk…
We propose an alternative approach towards cost mitigation in volatility-managed portfolios based on smoothing the predictive density of an otherwise standard stochastic volatility model. Specifically, we develop a novel variational Bayes…
We present a simulation-and-regression method for solving dynamic portfolio allocation problems in the presence of general transaction costs, liquidity costs and market impacts. This method extends the classical least squares Monte Carlo…