Related papers: Accelerated Share Repurchase: pricing and executio…
This paper studies an open question in the warehouse problem where a merchant trading a commodity tries to find an optimal inventory-trading policy to decide on purchase and sale quantities during a fixed time horizon in order to maximize…
This article considers the pricing and hedging of a call option when liquidity matters, that is, either for a large nominal or for an illiquid underlying asset. In practice, as opposed to the classical assumptions of a price-taking agent in…
We study a an optimal high frequency trading problem within a market microstructure model designed to be a good compromise between accuracy and tractability. The stock price is driven by a Markov Renewal Process (MRP), while market orders…
The Merton investment-consumption problem is fundamental, both in the field of finance, and in stochastic control. An important extension of the problem adds transaction costs, which is highly relevant from a financial perspective but also…
Much research has been done to analyze the stock market. After all, if one can determine a pattern in the chaotic frenzy of transactions, then they could make a hefty profit from capitalizing on these insights. As such, the goal of our…
This paper studies the problem of option replication in general stochastic volatility markets with transaction costs, using a new specification for the volatility adjustment in Leland's algorithm \cite{Leland}. We prove several limit…
We study a natural combinatorial pricing problem for sequentially arriving buyers with equal budgets. Each buyer is interested in exactly one pair of items and purchases this pair if and only if, upon arrival, both items are still available…
The paper addresses the problem of computing maximal expected time to termination of probabilistic timed automata (PTA) models, under the condition that the system will, eventually, terminate. This problem can exhibit high computational…
Optimal trade execution is an important problem faced by essentially all traders. Much research into optimal execution uses stringent model assumptions and applies continuous time stochastic control to solve them. Here, we instead take a…
In this paper, we introduce a novel reinforcement learning framework for optimal trade execution in a limit order book. We formulate the trade execution problem as a dynamic allocation task whose objective is the optimal placement of market…
Minimizing execution costs for large orders is a fundamental challenge in finance. Firms often depend on brokers to manage their trades due to limited internal resources for optimizing trading strategies. This paper presents a methodology…
This paper analyzes the timing options embedded in a startup firm, and the associated market entry and exit timing decisions under the exogenous risks of early termination and competitor's entry. Our valuation approach leads to the…
This paper covers a massive acceleration of Monte-Carlo based pricing method for financial products and financial derivatives. The method is applicable in risk management settings, where a financial product has to be priced under a number…
In this work, we consider the optimal portfolio selection problem under hard constraints on trading amounts, transaction costs and different rates for borrowing and lending when the risky asset returns are serially correlated. No…
We study paycheck optimization, which examines how to allocate income in order to achieve several competing financial goals. For paycheck optimization, a quantitative methodology is missing, due to a lack of a suitable problem formulation.…
A stock loan is a contract whereby a stockholder uses shares as collateral to borrow money from a bank or financial institution. In Xia and Zhou (2007), this contract is modeled as a perpetual American option with a time varying strike and…
Asynchronous trading in high-frequency financial markets introduces significant biases into econometric analysis, distorting risk estimates and leading to suboptimal portfolio decisions. Existing synchronization methods, such as the…
We consider an auction market in which market makers fill the order book during a given time period while some other investors send market orders. We define the clearing price of the auction as the price maximizing the exchanged volume at…
We propose a general approximation method for determining optimal trading strategies in markets with proportional transaction costs, with a polynomial approximation of the residual value function. The method is exemplified by several…
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…