Related papers: Simultaneous Trading in 'Lit' and Dark Pools
Financial markets are often modelled as if time were unique and continuous across assets and markets. Financial markets are however asynchronous, order flow is event-driven, and waiting times between events are often random. Many of the…
It is well-known that using delta hedging to hedge financial options is not feasible in practice. Traders often rely on discrete-time hedging strategies based on fixed trading times or fixed trading prices (i.e., trades only occur if the…
We propose a framework to study the optimal liquidation strategy in a limit order book for large-tick stocks, with spread equal to one tick. All order book events (market orders, limit orders and cancellations) occur according to…
The aim of this short note is to establish a limit theorem for the optimal trading strategies in the setup of the utility maximization problem with proportional transaction costs. This limit theorem resolves the open question from [4]. The…
This paper is concerned with a pairs trading rule. The idea is to monitor two historically correlated securities. When divergence is underway, i.e., one stock moves up while the other moves down, a pairs trade is entered which consists of a…
We study the problem of optimal execution of a trading order under Volume Weighted Average Price (VWAP) benchmark, from the point of view of a risk-averse broker. The problem consists in minimizing mean-variance of the slippage, with…
We examine the dynamics of the bid and ask queues of a limit order book and their relationship with the intensity of trade arrivals. In particular, we study the probability of price movements and trade arrivals as a function of the quote…
In the present work we tackle the problem of finding the optimal price tariff to be set by a risk-averse electric retailer participating in the pool and whose customers are price-sensitive. We assume that the retailer has access to a…
Automated market makers are a popular mechanism used on decentralized exchange, through which users trade assets with each other directly and automatically through a liquidity pool and a fixed pricing function. The liquidity provider…
The classical optimal investment and consumption problem with infinite horizon is studied in the presence of transaction costs. Both proportional and fixed costs as well as general utility functions are considered. Weak dynamic programming…
This paper studies a class of optimal multiple stopping problems driven by L\'evy processes. Our model allows for a negative effective discount rate, which arises in a number of financial applications, including stock loans and real…
We investigate the portfolio execution problem under a framework in which volatility and liquidity are both uncertain. In our model, we assume that a multidimensional Markovian stochastic factor drives both of them. Moreover, we model…
We propose a price impact model where changes in prices are purely driven by the order flow in the market. The stochastic price impact of market orders and the arrival rates of limit and market orders are functions of the market liquidity…
We propose a microstructural modeling framework for studying optimal market making policies in a FIFO (first in first out) limit order book (LOB). In this context, the limit orders, market orders, and cancel orders arrivals in the LOB are…
In this paper we discuss the optimal liquidation over a finite time horizon until the exit time. The drift and diffusion terms of the asset price are general functions depending on all variables including control and market regime. There is…
We empirically study the trading activity in the electronic on-book segment and in the dealership off-book segment of the London Stock Exchange, investigating separately the trading of active market members and of other market participants…
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 the problem of forecasting and optimally trading day-ahead versus real-time (DART) price spreads in U.S. wholesale electricity markets. Building on the framework of Galarneau-Vincent et al., we extend spike prediction from a single…
We analyze an optimal trade execution problem in a financial market with stochastic liquidity. To this end we set up a limit order book model in continuous time. Both order book depth and resilience are allowed to evolve randomly in time.…
Traders buy and sell financial instruments in hopes of making profit, and brokers are responsible for the transaction. There are several hypotheses and conspiracy theories arguing that in some situations, brokers want their traders to lose…