Related papers: Effective and simple VWAP option pricing model
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…
The random values and volumes of consecutive trades made at the exchange with shares of security determine its mean, variance, and higher statistical moments. The volume weighted average price (VWAP) is the simplest example of such a…
The volume weighted average price (VWAP) execution strategy is well known and widely used in practice. In this study, we explicitly introduce a trading volume process into the Almgren-Chriss model, which is a standard model for optimal…
This paper sets out to provide a general framework for the pricing of average-type options via lower and upper bounds. This class of options includes Asian, basket and options on the volume-weighted average price. We demonstrate that in…
Optimal liquidation using VWAP strategies has been considered in the literature, though never in the presence of permanent market impact and only rarely with execution costs. Moreover, only VWAP strategies have been studied and the pricing…
Volume-Weighted Average Price (VWAP) is arguably the most prevalent benchmark for trade execution as it provides an unbiased standard for comparing performance across market participants. However, achieving VWAP is inherently challenging…
We consider the consumption-based asset pricing model, derive a new modified basic pricing equation, and present its successive approximations using the Taylor series expansions of the investor's utility during the averaging time interval.…
In this short note, we study an optimization problem of expected implementation shortfall (IS) cost under general shaped market impact functions. In particular, we find that an optimal strategy is a VWAP (volume weighted average price)…
In the context of dealing with financial risk management problems it is desirable to have accurate bounds for option prices in situations when pricing formulae do not exist in the closed form. A unified approach for obtaining upper and…
The variance gamma model is a widely popular model for option pricing in both academia and industry. In this paper, we provide a new perspective for pricing European style options for the variance gamma model by deriving closed-form…
This paper presents a continuous-time model of intraday trading, pricing, and liquidity with dynamic TWAP and VWAP benchmarks. The model is solved in closed-form for the competitive equilibrium and also for non-price-taking equilibria. The…
We consider economic obstacles that limit the reliability and accuracy of value-at-risk (VaR). Investors who manage large market transactions should take into account the impact of the randomness of large trade volumes on predictions of…
We develop a framework for price-mediated contagion in financial systems where banks are forced to liquidate assets to satisfy a risk-weight based capital adequacy requirement. In constructing this modeling framework, we introduce a…
This study focuses on forecasting intraday trading volumes, a crucial component for portfolio implementation, especially in high-frequency (HF) trading environments. Given the current scarcity of flexible methods in this area, we employ a…
The market impact (MI) of Volume Weighted Average Price (VWAP) orders is a convex function of a trading rate, but most empirical estimates of transaction cost are concave functions. How is this possible? We show that isochronic (constant…
We introduce the price probability measure {\eta}(p;t) that defines the mean price p(1;t), mean square price p(2;t), price volatility {\sigma}p2(t)and all price n-th statistical moments p(n;t) as ratio of sums of n-th degree values C(n;t)…
Value-at-risk (VaR) has been playing the role of a standard risk measure since its introduction. In practice, the delta-normal approach is usually adopted to approximate the VaR of portfolios with option positions. Its effectiveness,…
We develop robust pricing and hedging of a weighted variance swap when market prices for a finite number of co--maturing put options are given. We assume the given prices do not admit arbitrage and deduce no-arbitrage bounds on the weighted…
We develop a theoretical trading conditioning model subject to price volatility and return information in terms of market psychological behavior, based on analytical transaction volume-price probability wave distributions in which we use…
In this project, we investigate the accuracy of forecasting intraday and daily trading volume of the exchange-traded fund SPY. The ability to forecast volume over varying time intervals with high accuracy is a critical element to many…