Related papers: Universal trading under proportional transaction c…
American options in a multi-asset market model with proportional transaction costs are studied in the case when the holder of an option is able to exercise it gradually at a so-called mixed (randomised) stopping time. The introduction of…
Optimal execution, i.e., the determination of the most cost-effective way to trade volumes in continuous trading sessions, has been a topic of interest in the equity trading world for years. Electricity intraday trading slowly follows this…
In this note, we study the utility maximization problem on the terminal wealth under proportional transaction costs and bounded random endowment. In particular, we restrict ourselves to the num\'eraire-based model and work with utility…
Using duality theory techniques we derive simple, closed-form formulas for bounding the optimal revenue of a monopolist selling many heterogeneous goods, in the case where the buyer's valuations for the items come i.i.d. from a uniform…
We study the problem of designing a two-sided market (double auction) to maximize the gains from trade (social welfare) under the constraints of (dominant-strategy) incentive compatibility and budget-balance. Our goal is to do so for an…
Pair trading is a market-neutral quantitative trading strategy that exploits price anomalies between two correlated assets. By taking simultaneous long and short positions, it generates profits based on relative price movements, independent…
In this paper, we analyze the problem of how to adapt the concept of proportionality to situations where several perfectly divisible resources have to be allocated among certain set of agents that have exactly one claim which is used for…
In this paper we consider a discrete-time risk sensitive portfolio optimization over a long time horizon with proportional transaction costs. We show that within the log-return i.i.d. framework the solution to a suitable Bellman equation…
This paper derives a robust on-line equity trading algorithm that achieves the greatest possible percentage of the final wealth of the best pairs rebalancing rule in hindsight. A pairs rebalancing rule chooses some pair of stocks in the…
Trading algorithms that execute large orders are susceptible to exploitation by order anticipation strategies. This paper studies the influence of order anticipation strategies in a multi-investor model of optimal execution under transient…
The design of data markets has gained importance as firms increasingly use machine learning models fueled by externally acquired training data. A key consideration is the externalities firms face when data, though inherently freely…
Financial market forecasting remains a formidable challenge despite the surge in computational capabilities and machine learning advancements. While numerous studies have underscored the precision of computer-generated market predictions,…
This paper is concerned with a pairs trading rule. The idea is to monitor two historically correlated securities. When divergence is underway, i.e., one stock moves up while the other moves down, a pairs trade is entered which consists of a…
This paper studies a portfolio optimization problem in a discrete-time Markovian model of a financial market, in which asset price dynamics depend on an external process of economic factors. There are transaction costs with a structure that…
In this paper we derive the optimal execution trajectory for a trader who wishes to buy or sell a large position of shares which evolve as a geometric Brownian process in contrast to the arithmetic model which prevails in the existing…
Optimal mechanisms have been provided in quite general multi-item settings, as long as each bidder's type distribution is given explicitly by listing every type in the support along with its associated probability. In the implicit setting,…
We consider an investor with constant absolute risk aversion who trades a risky asset with general Ito dynamics, in the presence of small proportional transaction costs. Kallsen and Muhle-Karbe (2012) formally derived the leading-order…
We consider infinite dimensional optimization problems motivated by the financial model called Arbitrage Pricing Theory. Using probabilistic and functional analytic tools, we provide a dual characterization of the super-replication cost.…
We use formal methods to specify, design, and monitor continuous double auctions, which are widely used to match buyers and sellers at exchanges of foreign currencies, stocks, and commodities. We identify three natural properties of such…
Pairs trading is a market-neutral strategy that exploits historical correlation between stocks to achieve statistical arbitrage. Existing pairs-trading algorithms in the literature require rather restrictive assumptions on the underlying…