Related papers: Simultaneous Trading in 'Lit' and Dark Pools
This paper studies the equilibrium pricing of asset shares in the presence of dynamic private information. The market consists of a risk-neutral informed agent who observes the firm value, noise traders, and competitive market makers who…
This paper studies arbitrage pricing theory in financial markets with implicit transaction costs. We extend the existing theory to include the more realistic possibility that the price at which the investors trade is dependent on the traded…
We study the problem of maximising terminal utility for an agent facing model uncertainty, in a frictionless discrete-time market with one safe asset and finitely many risky assets. We show that an optimal investment strategy exists if the…
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 introduce a simple stochastic volatility model, whose novelty consists in taking into account hitting times of the asset price, and study the optimal stopping problem corresponding to a put option whose time horizon (after the asset…
In this paper, we combine modern portfolio theory and option pricing theory so that a trader who takes a position in a European option contract and the underlying assets can construct an optimal portfolio such that at the moment of the…
The limit order book mechanism has been the core trading mechanism of the modern financial market. In the cryptocurrency market, centralized exchanges also adopt this limit order book mechanism and a centralized matching engine dynamically…
We establish a super-replication duality in a continuous-time financial model where an investor's trades adversely affect bid- and ask-prices for a risky asset and where market resilience drives the resulting spread back towards zero at an…
In financial markets, the order flow, defined as the process assuming value one for buy market orders and minus one for sell market orders, displays a very slowly decaying autocorrelation function. Since orders impact prices, reconciling…
In frictionless markets, utility maximization problems are typically solved either by stochastic control or by martingale methods. Beginning with the seminal paper of Davis and Norman [Math. Oper. Res. 15 (1990) 676--713], stochastic…
We propose a new model for the level I of a Limit Order Book (LOB), which incorporates the information about the standing orders at the opposite side of the book after each price change and the arrivals of new orders within the spread. Our…
The increasing penetration of variable renewable energy and flexible demand technologies, such as electric vehicles and heat pumps, introduces significant uncertainty in power systems, resulting in greater imbalance; defined as the…
In this paper, the optimal pricing strategy in Avellande-Stoikov's for a monopolistic dealer is extended to a general situation where multiple dealers are present in a competitive market. The dealers' trading intensities, their optimal bid…
The present paper investigates how insiders strategically navigate ongoing legal risk while leveraging stealth trading within a continuous-time Kyle-type framework. Legal enforcement operates concurrently with trading, which dynamic can be…
This paper presents a derivation of the explicit price for the perpetual American put option in the Black-Scholes model, time-capped by the first drawdown epoch beyond a predefined level. We demonstrate that the optimal exercise strategy…
We continue the analysis of our previous paper (Czichowsky/Schachermayer/Yang 2014) pertaining to the existence of a shadow price process for portfolio optimisation under proportional transaction costs. There, we established a positive…
We consider the problem of the optimal trading strategy in the presence of linear costs, and with a strict cap on the allowed position in the market. Using Bellman's backward recursion method, we show that the optimal strategy is to switch…
Price impact of a trade is an important element in pre-trade and post-trade analyses. We introduce a framework to analyze the market price of liquidity risk, which allows us to derive an inhomogeneous Bernoulli ordinary differential…
In the present work we develop a formalism to tackle the problem of optimal execution when trading market securities. More precisely, we introduce a utility function that balances market impact and timing risk, with this last being modelled…
For portfolio optimisation under proportional transaction costs, we provide a duality theory for general cadlag price processes. In this setting, we prove the existence of a dual optimiser as well as a shadow price process in a generalised…