Related papers: Self-Financing Trading and the Ito-Doeblin Lemma
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,…
We introduce an autoregressive-type model of prices in financial market taking into account the self-modulation effect. We find that traders are mainly using strategies with weighted feedbacks of past prices. These feedbacks are responsible…
The autonomous trading agent is one of the most actively studied areas of artificial intelligence to solve the capital market portfolio management problem. The two primary goals of the portfolio management problem are maximizing profit and…
An approximation method for construction of optimal strategies in the bid \& ask limit order book in the high-frequency trading (HFT) is studied. The basis is the article by M. Avellaneda \& S. Stoikov 2008, in which certain seemingly…
Self-training is a useful strategy for semi-supervised learning, leveraging raw texts for enhancing model performances. Traditional self-training methods depend on heuristics such as model confidence for instance selection, the manual…
This paper examines the role of algorithmic trading in modern financial markets. Additionally, order types, characteristics, and special features of algorithmic trading are described under the lens provided by the large development of high…
Modern approaches to stock pricing in quantitative finance are typically founded on the 'Black-Scholes model' and the underlying 'random walk hypothesis'. Empirical data indicate that this hypothesis works well in stable situations but, in…
A competitive learning model was introduced in Ref. 1 (A. Mehta and J. M. Luck, Phys. Rev. E 60, 5, 1999), in which the learning is outcome-related. Every individual chooses between a pair of existing strategies or types, guided by a…
We introduce a stochastic price model where, together with a random component, a moving average of logarithmic prices contributes to the price formation. Our model is tested against financial datasets, showing an extremely good agreement…
This short review presents a selected history of the mutual fertilization between physics and economics, from Isaac Newton and Adam Smith to the present. The fundamentally different perspectives embraced in theories developed in financial…
Simultaneous ascending auctions present agents with the exposure problem: bidding to acquire a bundle risks the possibility of obtaining an undesired subset of the goods. Auction theory provides little guidance for dealing with this…
We introduce a new Self-Organized Criticality (SOC) model for simulating price evolution in an artificial financial market, based on a multilayer network of traders. The model also implements, in a quite realistic way with respect to…
Recent advances in Artificial Intelligence (AI) have made algorithmic trading play a central role in finance. However, current research and applications are disconnected information islands. We propose a generally applicable pipeline for…
Reinforcement Learning (RL) has experienced significant advancement over the past decade, prompting a growing interest in applications within finance. This survey critically evaluates 167 publications, exploring diverse RL applications and…
We consider the problem of utility maximization for small traders on incomplete financial markets. As opposed to most of the papers dealing with this subject, the investors' trading strategies we allow underly constraints described by…
We study risk-sharing economies where heterogenous agents trade subject to quadratic transaction costs. The corresponding equilibrium asset prices and trading strategies are characterised by a system of nonlinear, fully-coupled…
The behavior of the quintessence field is studied during inflation. In order to have a satisfactory model of dark energy, the quintessence field value today should be as insensible to the initial conditions as possible. Usually, only the…
The Cartier-Perrin theorem, which was published in 1995 and is expressed in the language of nonstandard analysis, permits, for the first time perhaps, a clear-cut mathematical definition of the volatility of a financial asset. It yields as…
This paper argues that the fundamental principle of contemporary financial economics is balanced reciprocity, not the principle of utility maximisation that is important in economics more generally. The argument is developed by analysing…
In the seminal paper on optimal execution of portfolio transactions, Almgren and Chriss (2001) define the optimal trading strategy to liquidate a fixed volume of a single security under price uncertainty. Yet there exist situations, such as…