Related papers: Optimal Trading with Alpha Predictors
We propose a price impact model where changes in prices are purely driven by the order flow in the market. The stochastic price impact of market orders and the arrival rates of limit and market orders are functions of the market liquidity…
We present a new approach for studying the problem of optimal hedging of a European option in a finite and complete discrete-time market model. We consider partial hedging strategies that maximize the success probability or minimize the…
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…
In this paper, we investigate dynamic optimization problems featuring both stochastic control and optimal stopping in a finite time horizon. The paper aims to develop new methodologies, which are significantly different from those of mixed…
We consider a simplified model for optimizing a single-asset portfolio in the presence of transaction costs given a signal with a certain autocorrelation and cross-correlation structure. In our setup, the portfolio manager is given two…
Electricity market operators worldwide use mixed-integer linear programming to solve the allocation problem in wholesale electricity markets. Prices are typically determined based on the duals of relaxed versions of this optimization…
We consider the Brownian market model and the problem of expected utility maximization of terminal wealth. We, specifically, examine the problem of maximizing the utility of terminal wealth under the presence of transaction costs of a…
A challenging category of robotics problems arises when sensing incurs substantial costs. This paper examines settings in which a robot wishes to limit its observations of state, for instance, motivated by specific considerations of energy…
We propose a general approximation method for determining optimal trading strategies in markets with proportional transaction costs, with a polynomial approximation of the residual value function. The method is exemplified by several…
Two major financial market complexities are transaction costs and uncertain volatility, and we analyze their joint impact on the problem of portfolio optimization. When volatility is constant, the transaction costs optimal investment…
Optimal execution of portfolio transactions is the essential part of algorithmic trading. In this paper we present in simple analytical form the optimal trajectory for risk-averse trader with the assumption of exponential market recovery…
Market makers provide liquidity to other market participants: they propose prices at which they stand ready to buy and sell a wide variety of assets. They face a complex optimization problem with both static and dynamic components. They…
Large scale electricity storage is set to play an increasingly important role in the management of future energy networks. A major aspect of the economics of such projects is captured in arbitrage, i.e. buying electricity when it is cheap…
Optimal trading strategies for pairs trading have been studied by models that try to find either optimal shares of stocks by assuming no transaction costs or optimal timing of trading fixed numbers of shares of stocks with transaction…
This paper studies some unconventional utility maximization problems when the ratio type relative portfolio performance is periodically evaluated over an infinite horizon. Meanwhile, the agent is prohibited from short-selling stocks. Our…
Most finance studies are discussed on the basis of several hypotheses, for example, investors rationally optimize their investment strategies. However, the hypotheses themselves are sometimes criticized. Market impacts, where trades of…
This paper concerns the numerical solution of a fully nonlinear parabolic double obstacle problem arising from a finite portfolio selection with proportional transaction costs. We consider the optimal allocation of wealth among multiple…
This paper discusses the num\'eraire-based utility maximization problem in markets with proportional transaction costs. In particular, the investor is required to liquidate all her position in stock at the terminal time. We first observe…
We present a new model for prediction markets, in which we use risk measures to model agents and introduce a market maker to describe the trading process. This specific choice on modelling tools brings us mathematical convenience. The…
This paper studies an optimal trading problem that incorporates the trader's market view on the terminal asset price distribution and uninformative noise embedded in the asset price dynamics. We model the underlying asset price evolution by…