Related papers: VWAP Execution as an Optimal Strategy
The problem of order execution is cast as a relative entropy-regularized robust optimal control problem in this article. The order execution agent's goal is to maximize an objective functional associated with his profit-and-loss of trading…
We introduce a price impact model which accounts for finite market depth, tightness and resilience. Its coupled bid- and ask-price dynamics induce convex liquidity costs. We provide existence of an optimal solution to the classical problem…
We present a novel method for the numerical pricing of American options based on Monte Carlo simulation and the optimization of exercise strategies. Previous solutions to this problem either explicitly or implicitly determine so-called…
In this paper, we investigate trading strategies based on exponential moving averages (ExpMAs) of an underlying risky asset. We study both logarithmic utility maximization and long-term growth rate maximization problems and find closed-form…
This paper studies the multi-period mean-variance portfolio allocation problem with transaction costs. Many methods have been proposed these last years to challenge the famous uni-period Markowitz strategy.But these methods cannot integrate…
An important revenue stream for electric battery operators is often arbitraging the hourly price spreads in the day-ahead auction. The optimal approach to this is challenging if risk is a consideration as this requires the estimation of…
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…
We investigate the optimal execution of contracts that are used in merger\&acquisition deals. We consider cash-settled and physically delivered contracts between a broker and a counterpart. Contracts are linear (total returns swaps),…
We consider an optimal trading problem over a finite period of time during which an investor has access to both a standard exchange and a dark pool. We take the exchange to be an order-driven market and propose a continuous-time setup for…
The steady-state turnover of a trading strategy is of clear interest to practitioners and portfolio managers, as is the steady-state Sharpe ratio. In this article, we show that in a convenient Gaussian process model, the steady-state…
We develop an approach to risk minimization and stochastic optimization that provides a convex surrogate for variance, allowing near-optimal and computationally efficient trading between approximation and estimation error. Our approach…
This work focuses on the mathematical study of constant function market makers. We rigorously establish the conditions for optimal trading under the assumption of a quasilinear, but not necessarily convex (or concave), trade function. This…
We investigate the general structure of optimal investment and consumption with small proportional transaction costs. For a safe asset and a risky asset with general continuous dynamics, traded with random and time-varying but small…
We study optimal liquidation of a trading position (so-called block order or meta-order) in a market with a linear temporary price impact (Kyle, 1985). We endogenize the pressure to liquidate by introducing a downward drift in the…
In this research, we develop a trading strategy for the discrete-time optimal liquidation problem of large order trading with different market microstructures in an illiquid market. In this framework, the flow of orders can be viewed as a…
In nonstandard testing environments, researchers often derive ad hoc tests with correct (asymptotic) size, but their optimality properties are typically unknown a priori and difficult to assess. This paper develops a numerical framework for…
The classical discrete time model of proportional transaction costs relies on the assumption that a feasible portfolio process has solvent increments at each step. We extend this setting in two directions, allowing for convex transaction…
We study several optimal stopping problems that arise from trading a mean-reverting price spread over a finite horizon. Modeling the spread by the Ornstein-Uhlenbeck process, we analyze three different trading strategies: (i) the long-short…
We introduce the Lyapunov approach to optimal control problems of average risk-sensitive Markov control processes with general risk maps. Motivated by applications in particular to behavioral economics, we consider possibly non-convex risk…
This scientific paper propose a novel portfolio optimization model using an improved deep reinforcement learning algorithm. The objective function of the optimization model is the weighted sum of the expectation and value at risk(VaR) of…