Related papers: Optimal execution with nonlinear transient market …
We propose a macroscopic market making model \`a la Avellaneda-Stoikov, using continuous processes for orders instead of discrete point processes. The model intends to bridge the gap between market making and optimal execution problems,…
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 theoretically and empirically study portfolio optimization under transaction costs and establish a link between turnover penalization and covariance shrinkage with the penalization governed by transaction costs. We show how the ex ante…
We discuss investment allocation to multiple alpha streams traded on the same execution platform with internal crossing of trades and point out differences with allocating investment when alpha streams are traded on separate execution…
We consider a bandit optimization problem for nonconvex and non-smooth functions, where in each trial the loss function is the sum of a linear function and a small but arbitrary perturbation chosen after observing the player's choice. We…
We study the optimal liquidation problem in a market model where the bid price follows a geometric pure jump process whose local characteristics are driven by an unobservable finite-state Markov chain and by the liquidation rate. This model…
In this study, we introduce an explicit trading-volume process into the Almgren-Chriss model, which is a standard model for optimal execution. We propose a penalization method for deriving a verification theorem for an adaptive optimization…
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…
This paper introduces a high frequency trade execution model to evaluate the economic impact of supervised machine learners. Extending the concept of a confusion matrix, we present a 'trade information matrix' to attribute the expected…
Efficient methods to provide sub-optimal solutions to non-convex optimization problems with knowledge of the solution's sub-optimality would facilitate the widespread application of nonlinear optimal control algorithms. To that end,…
We consider a type of optimal switching problems with non-uniform execution delays and ramping. Such problems frequently occur in the operation of economical and engineering systems. We first provide a solution to the problem by applying a…
The classical optimal trading problem is the closure of a position in an asset over a time interval; the trader maximizes an expected utility under the constraint that the position be fully closed by terminal time. Since the asset price is…
The feeder reconfiguration problem chooses the on/off status of the switches in a distribution network in order to minimize a certain cost such as power loss. It is a mixed integer nonlinear program and hence hard to solve. A popular…
This paper studies the risk-adjusted optimal timing to liquidate an option at the prevailing market price. In addition to maximizing the expected discounted return from option sale, we incorporate a path-dependent risk penalty based on…
We model an informed agent with information about the future value of an asset trying to maximize profits when subjected to a transaction cost as well as a market maker tasked with setting fair transaction prices. In a single auction model,…
This paper studies optimal market making for large-tick assets in the presence of latency. We consider a random walk model for the asset price, and formulate the market maker's optimization problem using Markov Decision Processes (MDP). We…
We propose a novel transformer-based neural network architecture (ICON-OCnet) for solving optimal order execution problems in the presence of unknown price impact. Our architecture facilitates data-driven in-context operator learning for…
Environments with fixed adjustment costs such as transaction costs or \lq menu costs\rq$ $ are widespread within economic systems. The presence of fixed minimal adjustment costs produces adjustment stickiness so that agents must choose a…
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.…
We consider a dynamic portfolio optimization problem that incorporates predictable returns, instantaneous transaction costs, price impact, and stochastic volatility, extending the classical results of Garleanu and Pedersen (2013), which…