Related papers: Simultaneous Trading in 'Lit' and Dark Pools
In this work, we study a dynamic portfolio optimization problem related to pairs trading, which is an investment strategy that matches a long position in one security with a short position in another security with similar characteristics.…
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…
High Frequency Trading (HFT) represents an ever growing proportion of all financial transactions as most markets have now switched to electronic order book systems. The main goal of the paper is to propose continuous time equations which…
This paper studies the utility maximization on the terminal wealth with random endowments and proportional transaction costs. To deal with unbounded random payoffs from some illiquid claims, we propose to work with the acceptable portfolios…
The focus of this paper is on identifying the most effective selling strategy for pairs trading of stocks. In pairs trading, a long position is held in one stock while a short position is held in another. The goal is to determine the…
We study the relationship between price spread, volatility and trading volume. We find that spread forms as a result of interplay between order liquidity and order impact. When trading volume is small adding more liquidity helps improve…
This paper discusses the num\'eraire-based utility maximization problem in markets with proportional transaction costs. In particular, the investor is required to liquidate all her position in stock at the terminal time. We first observe…
We give a complete solution to the problem of minimizing the expected liquidity costs in presence of a general drift when the underlying market impact model has linear transient price impact with exponential resilience. It turns out that…
Optimal execution is a sequential decision-making problem for cost-saving in algorithmic trading. Studies have found that reinforcement learning (RL) can help decide the order-splitting sizes. However, a problem remains unsolved: how to…
We characterize profit-maximizing operating strategies, over some time horizon [0,T], for an energy store which is trading in an arbitrage market. Our theory allows for leakage, operating inefficiencies, operating constraints and general…
We develop a new market-making model, from the ground up, which is tailored towards high-frequency trading under a limit order book (LOB), based on the well-known classification of order types in market microstructure. Our flexible…
This paper extends the theoretical framework introduced in Liquidity Pools as Mean Field Games: A New Framework, where the interactions among traders in a constant product market-making protocol were modeled using mean field games (MFG). In…
Considering that a trader or a trading algorithm interacting with markets during continuous auctions can be modeled by an iterating procedure adjusting the price at which he posts orders at a given rhythm, this paper proposes a procedure…
In this paper, we present a multi-period trading model in the style of Kyle (1985)'s inside trading model, by assuming that there are at least two insiders in the market with long-lived private information, under the requirement that each…
We study the problem of the optimal execution of a large trade in the presence of nonlinear transient impact. We propose an approach based on homotopy analysis, whereby a well behaved initial strategy is continuously deformed to lower the…
We show that the cost of market orders and the profit of infinitesimal market-making or -taking strategies can be expressed in terms of directly observable quantities, namely the spread and the lag-dependent impact function. Imposing that…
We study an optimal execution strategy for purchasing a large block of shares over a fixed time horizon. The execution problem is subject to a general price impact that gradually dissipates due to market resilience. We allow for general…
With the fragmentation of electronic markets, exchanges are now competing in order to attract trading activity on their platform. Consequently, they developed several regulatory tools to control liquidity provision / consumption on their…
We consider the problem of dynamic buying and selling of shares from a collection of $N$ stocks with random price fluctuations. To limit investment risk, we place an upper bound on the total number of shares kept at any time. Assuming that…
We consider a central trading desk which aggregates the inflow of clients' orders with unobserved toxicity, i.e. persistent adverse directionality. The desk chooses either to internalise the inflow or externalise it to the market in a cost…