Related papers: Optimal Multiple Trading Times Under the Exponenti…
Quantitative understanding of stochastic dynamics in limit order price changes is essential for execution strategy design. We analyze intraday transition dynamics of ask and bid orders across market capitalization tiers using high-frequency…
We propose a novel group of Gaussian Process based algorithms for fast approximate optimal stopping of time series with specific applications to financial markets. We show that structural properties commonly exhibited by financial time…
Optimal execution of a portfolio have been a challenging problem for institutional investors. Traders face the trade-off between average trading price and uncertainty, and traditional methods suffer from the curse of dimensionality. Here,…
Most energy and commodity markets exhibit mean-reversion and occasional distinctive price spikes, which results in demand for derivative products which protect the holder against high prices. To this end, in this paper we present exact and…
We consider an optimal investment problem to maximize expected utility of the terminal wealth, in an illiquid market with search frictions and transaction costs. In the market model, an investor's attempt of transaction is successful only…
We study $N$-player optimal execution games in an Obizhaeva--Wang model of transient price impact. When the game is regularized by an instantaneous cost on the trading rate, a unique equilibrium exists and we derive its closed form. Whereas…
We consider a controlled double-ended queue consisting of two classes of customers, labeled sellers and buyers. The sellers and buyers arrive in a trading market according to two independent renewal processes. Whenever there is a seller and…
This paper studies the problem of determining the optimal cut-off for pairs trading rules. We consider two correlated assets whose spread is modelled by a mean-reverting process with stochastic volatility, and the optimal pair trading rule…
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…
We study a natural combinatorial pricing problem for sequentially arriving buyers with equal budgets. Each buyer is interested in exactly one pair of items and purchases this pair if and only if, upon arrival, both items are still available…
A continuous-time Markowitz's mean-variance portfolio selection problem is studied in a market with one stock, one bond, and proportional transaction costs. This is a singular stochastic control problem,inherently in a finite time horizon.…
In this paper, we focus on the problem of optimal portfolio-consumption policies in a multi-asset financial market, where the n risky assets follow Exponential Ornstein-Uhlenbeck processes, along with one risk-free bond. The investor's…
American options are studied in a general discrete market in the presence of proportional transaction costs, modelled as bid-ask spreads. Pricing algorithms and constructions of hedging strategies, stopping times and martingale…
In this article we discuss the problem of calculating optimal model-independent (robust) bounds for the price of Asian options with discrete and continuous averaging. We will give geometric characterisations of the maximising and the…
We consider the Black--Scholes model of financial market modified to capture the stochastic nature of volatility observed at real financial markets. For volatility driven by the Ornstein--Uhlenbeck process, we establish the existence of…
We study the problem of option pricing and hedging strategies within the frame-work of risk-return arguments. An economic agent is described by a utility function that depends on profit (an expected value) and risk (a variance). In the…
We consider the optimal trade execution strategies for a large portfolio of single stocks proposed by Almgren (2003). This framework accounts for a nonlinear impact of trades on average market prices. The results of Almgren (2003) are based…
A classical inventory problem is studied from the perspective of embedded options, reducing inventory-management to the design of optimal contracts for forward delivery of stock (commodity). Financial option techniques \`{a} la…
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 study scaled trinomial models converging to the Black--Scholes model, and analyze exponential certainty-equivalent prices for path-dependent European options. As the number of trading dates $n$ tends to infinity and the risk aversion is…