Related papers: A dynamic optimal execution strategy under stochas…
This paper considers the problem of optimal liquidation of a position in a risky security in a financial market, where price evolution are risky and trades have an impact on price as well as uncertainty in the filling orders. The problem is…
We consider a class of closed loop stochastic optimal control problems in finite time horizon, in which the cost is an expectation conditional on the event that the process has not exited a given bounded domain. An important difficulty is…
Market makers continuously set bid and ask quotes for the stocks they have under consideration. Hence they face a complex optimization problem in which their return, based on the bid-ask spread they quote and the frequency at which they…
In this research, we develop a trading strategy for the discrete-time optimal liquidation problem of large order trading with different market microstructures in an illiquid market. In this framework, the flow of orders can be viewed as a…
We study the optimal order placement strategy with the presence of a liquidity cost. In this problem, a stock trader wishes to clear her large inventory by a predetermined time horizon $T$. A trader uses both limit and market orders, and 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…
We study an optimal execution problem in the presence of market impact where the security price follows a geometric Ornstein-Uhlenbeck process, which implies the mean-reverting property, and show that the optimal strategy is a mixture of…
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 examine optimal execution models that take into account both market microstructure impact and informational costs. Informational footprint is related to order flow and is represented by the trader's influence on the flow imbalance…
In this paper, we employ the Heston stochastic volatility model to describe the stock's volatility and apply the model to derive and analyze the optimal trading strategies for dealers in a security market. We also extend our study to option…
We present a method for obtaining approximate solutions to the problem of optimal execution, based on a signature method. The framework is general, only requiring that the price process is a geometric rough path and the price impact…
We study optimal trade execution strategies in financial markets with discrete order flow. The agent has a finite liquidation horizon and must minimize price impact given a random number of incoming trade counterparties. Assuming that the…
In this study, we extend the optimal execution problem with convex market impact function studied in Kato (2014) to the case where the market impact function is S-shaped, that is, concave on $[0, \bar {x}_0]$ and convex on $[\bar {x}_0,…
We propose a microstructural modeling framework for studying optimal market making policies in a FIFO (first in first out) limit order book (LOB). In this context, the limit orders, market orders, and cancel orders arrivals in the LOB are…
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…
The ad-trading desks of media-buying agencies are increasingly relying on complex algorithms for purchasing advertising inventory. In particular, Real-Time Bidding (RTB) algorithms respond to many auctions -- usually Vickrey auctions --…
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)…
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…
This paper deals with an optimal position management problem for a market maker who has to face uncertain customer order flows in an illiquid market, where the market maker's continuous trading incurs a stochastic linear price impact.…
We study the problem of optimal portfolio selection under stochastic volatility within a continuous time reinforcement learning framework with portfolio constraints. Exploration is modeled through entropy-regularized relaxed controls, where…