Related papers: Optimal consumption and investment under transacti…
This paper studies an open question in the warehouse problem where a merchant trading a commodity tries to find an optimal inventory-trading policy to decide on purchase and sale quantities during a fixed time horizon in order to maximize…
We employ perturbation analysis technique to study multi-asset portfolio optimisation with transaction cost. We allow for correlations in risky assets and obtain optimal trading methods for general utility functions. Our analytical results…
In this paper we explore optimal liquidation in a market populated by a number of heterogeneous market makers that have limited inventory-carrying and risk-bearing capacity. We derive a reduced form model for the dynamic of their aggregated…
We construct an utility-based dynamic asset pricing model for a limit order market. The price is nonlinear in volume and subject to market impact. We solve an optimal hedging problem under the market impact and derive the dynamics of the…
This paper considers the problem faced by a bank which trades in the funds market so as to maintain the reserve requirements and minimize the costs of doing that. We work in a stochastic paradigm and the reserve requirements are determined…
We study the Merton portfolio management problem within a complete market, non constant time discount rate and general utility framework. The non constant discount rate introduces time inconsistency which can be solved by introducing sub…
We study a stochastic control problem for continuous multidimensional martingales with fixed quadratic variation. In a radially symmetric environment, we are able to find an explicit solution to the control problem and find an optimal…
We prove the existence of an equilibrium in a model with transaction costs and price impact where two agents are incentivized to trade towards a target. The two types of frictions -- price impact and transaction costs -- lead the agents to…
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…
We prove the existence of a Radner equilibrium in a model with proportional transaction costs on an infinite time horizon and analyze the effect of transaction costs on the endogenously determined interest rate. Two agents receive…
This paper studies a sequential decision problem where payoff distributions are known and where the riskiness of payoffs matters. Equivalently, it studies sequential choice from a repeated set of independent lotteries. The decision-maker is…
The model of this paper gives a convenient strategy that a bank in the federal funds market can use in order to maximize its profit in a contemporaneous reserve requirement (CRR) regime. The reserve requirements are determined by the demand…
This paper studies a finite-horizon portfolio selection problem with non-concave terminal utility and proportional transaction costs, in which the commonly used concavification principle for terminal value is no longer applicable. We…
We investigate the ergodic problem of growth-rate maximization under a class of risk constraints in the context of incomplete, It\^{o}-process models of financial markets with random ergodic coefficients. Including {\em value-at-risk}…
We study an optimal liquidation problem with multiplicative price impact in which the trend of the asset's price is an unobservable Bernoulli random variable. The investor aims at selling over an infinite time-horizon a fixed amount of…
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…
This paper studies finite-time optimal consumption-investment problems with power, logarithmic and exponential utilities, in a regime switching market with random coefficients, subject to coupled constraints on the consumption and…
We prove the Fundamental Theorem of Asset Pricing for a discrete time financial market where trading is subject to proportional transaction cost and the asset price dynamic is modeled by a family of probability measures, possibly…
We consider the problem of optimizing the expected logarithmic utility of the value of a portfolio in a binomial model with proportional transaction costs with a long time horizon. By duality methods, we can find expressions for the…
This paper studies the problem of optimal investment with CRRA (constant, relative risk aversion) preferences, subject to dynamic risk constraints on trading strategies. The market model considered is continuous in time and incomplete. the…