Related papers: VWAP Execution as an Optimal Strategy
We develop a dynamic trading strategy in the Linear Quadratic Regulator (LQR) framework. By including a price mean-reversion signal into the optimization program, in a trading environment where market impact is linear and stage costs are…
This paper deals with numerical solutions to an impulse control problem arising from optimal portfolio liquidation with bid-ask spread and market price impact penalizing speedy execution trades. The corresponding dynamic programming (DP)…
Minimizing execution costs for large orders is a fundamental challenge in finance. Firms often depend on brokers to manage their trades due to limited internal resources for optimizing trading strategies. This paper presents a methodology…
We study the problem of optimal trading using general alpha predictors with linear costs and temporary impact. We do this within the framework of stochastic optimization with finite horizon using both limit and market orders. Consistently…
This paper examines a trade execution game for two large traders in a generalized price impact model. We incorporate a stochastic and sequentially dependent factor that exogenously affects the market price into financial markets. Our model…
In this article, we consider the optimal execution problem associated to accelerated share repurchase contracts. When firms want to repurchase their own shares, they often enter such a contract with a bank. The bank buys the shares for the…
In a one-sided limit order book, satisfying some realistic assumptions, where the unaffected price process follows a Levy process, we consider a market agent that wants to liquidate a large position of shares. We assume that the agent has…
The aim of this paper is to compare the performances of the optimal strategy under parameters mis-specification and of a technical analysis trading strategy. The setting we consider is that of a stochastic asset price model where the trend…
We study the problem of the execution of a moderate size order in an illiquid market within the framework of a solvable Markovian model. We suppose that in order to avoid impact costs, a trader decides to execute her order through a unique…
This paper studies a portfolio optimization problem in a discrete-time Markovian model of a financial market, in which asset price dynamics depend on an external process of economic factors. There are transaction costs with a structure that…
We propose a framework for studying optimal market making policies in a limit order book (LOB). The bid-ask spread of the LOB is modelled by a Markov chain with finite values, multiple of the tick size, and subordinated by the Poisson…
Mean-reverting behavior of individuals assets is widely known in financial markets. In fact, we can construct a portfolio that has mean-reverting behavior and use it in trading strategies to extract profits. In this paper, we show that we…
We consider a two-way trading problem, where investors buy and sell a stock whose price moves within a certain range. Naturally they want to maximize their profit. Investors can perform up to $k$ trades, where each trade must involve the…
This paper addresses the trade-off between internalisation and externalisation in the management of stochastic trade flows. We consider agents who must absorb flows and manage risk by deciding whether to warehouse it or hedge in the market,…
This paper develops a unified explicit solution theory for optimal execution through sequential limit-order placement in a limit order book. Rather than controlling only the trading speed of a metaorder, we determine how individual limit…
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…
Despite the fact that an intraday market price distribution is not normal, the random walk model of price behaviour is as important for the understanding of basic principles of the market as the pendulum model is a starting point of many…
We consider an optimal investment and risk control problem for an insurer under the mean-variance (MV) criterion. By introducing a deterministic auxiliary process defined forward in time, we formulate an alternative time-consistent problem…
Execution algorithms are vital to modern trading, they enable market participants to execute large orders while minimising market impact and transaction costs. As these algorithms grow more sophisticated, optimising them becomes…
We study Markov decision processes with Polish state and action spaces. The action space is state dependent and is not necessarily compact. We first establish the existence of an optimal ergodic occupation measure using only a near-monotone…