Related papers: Optimal execution with nonlinear transient market …
We deal with the optimal execution problem when the broker's goal is to reach a performance barrier avoiding a downside barrier. The performance is provided by the wealth accumulated by trading in the market, the shares detained by the…
We model the impact costs of a strategy that trades a basket of correlated instruments, by extending to the multivariate case the linear propagator model previously used for single instruments. Our specification allows us to calibrate a…
In this paper, we introduce a novel reinforcement learning framework for optimal trade execution in a limit order book. We formulate the trade execution problem as a dynamic allocation task whose objective is the optimal placement of market…
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)…
We consider the problem of the optimal trading strategy in the presence of linear costs, and with a strict cap on the allowed position in the market. Using Bellman's backward recursion method, we show that the optimal strategy is to switch…
We consider a discrete-time model of a financial market where a risky asset is bought and sold with transactions having a transient price impact. It is shown that the corresponding utility maximization problem admits a solution. We manage…
We assume a continuous-time price impact model similar to Almgren-Chriss but with the added assumption that the price impact parameters are stochastic processes modeled as correlated scalar Markov diffusions. In this setting, we develop…
In this paper, we analyze the continuous armed bandit problems for nonconvex cost functions under certain smoothness and sublevel set assumptions. We first derive an upper bound on the expected cumulative regret of a simple bin splitting…
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)…
We consider a model in which a trader aims to maximize expected risk-adjusted profit while trading a single security. In our model, each price change is a linear combination of observed factors, impact resulting from the trader's current…
We prove the existence of an equilibrium in a model with transaction costs and price impact where two agents are incentivized to trade towards a target. The two types of frictions -- price impact and transaction costs -- lead the agents to…
In financial markets, liquidity is not constant over time but exhibits strong seasonal patterns. In this article we consider a limit order book model that allows for time-dependent, deterministic depth and resilience of the book and…
We consider a broker who has to place a large order which consumes a sizable part of average daily trading volume. The broker's aim is thus to minimize execution costs he incurs from the adverse impact of his trades on market prices. By…
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…
Given the marginal distribution information of the underlying asset price at two future times $T_1$ and $T_2$, we consider the problem of determining a model-free upper bound on the price of a class of American options that must be…
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 investigate optimal order execution problems in discrete time with instantaneous price impact and stochastic resilience. First, in the setting of linear transient price impact we derive a closed-form recursion for the optimal strategy,…
The system operator's scheduling problem in electricity markets, called unit commitment, is a non-convex mixed-integer program. The optimal value function is non-convex, preventing the application of traditional marginal pricing theory to…
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 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…