Related papers: Optimal Mean-Reverting Spread Trading: Nonlinear I…
We study the problem of optimal trading using general alpha predictors with linear costs and temporary impact. We do this within the framework of stochastic optimization with finite horizon using both limit and market orders. Consistently…
We describe a variational approach to solving optimal stopping problems for diffusion processes, as an alternative to the traditional approach based on the solution of the free-boundary problem. We study smooth pasting conditions from a…
We develop a theory for solving continuous time optimal stopping problems for non-linear expectations. Our motivation is to consider problems in which the stopper uses risk measures to evaluate future rewards.
In this paper, the optimal mean-reverting portfolio (MRP) design problem is considered, which plays an important role for the statistical arbitrage (a.k.a. pairs trading) strategy in financial markets. The target of the optimal MRP design…
We consider a spread financial market defined by the multidimensional Ornstein--Uhlenbeck (OU) process. We study the optimal consumption/investment problem for logarithmic utility functions in the base of stochastic dynamical programming…
In this article we study an optimal stopping/optimal control problem which models the decision facing a risk-averse agent over when to sell an asset. The market is incomplete so that the asset exposure cannot be hedged. In addition to the…
We study the problem of the optimal execution of a large trade in the presence of nonlinear transient impact. We propose an approach based on homotopy analysis, whereby a well behaved initial strategy is continuously deformed to lower the…
We study an optimal portfolio problem designed for an agent operating in intraday electricity markets. The investor is allowed to trade in a single risky asset modelling the continuously traded power and aims to maximize the expected…
For an infinite-horizon continuous-time optimal stopping problem under non-exponential discounting, we look for an optimal equilibrium, which generates larger values than any other equilibrium does on the entire state space. When the…
We make a rigorous analysis of the existence and characterization of the free boundary related to the optimal stopping problem that maximizes the mean of an Ornstein--Uhlenbeck bridge. The result includes the Brownian bridge problem as a…
In this research we study a finite horizon optimal purchasing problem for items with a mean reverting price process. Under this model a fixed amount of identical items are bought under a given deadline, with the objective of minimizing the…
The classical optimal trading problem is the closure of a position in an asset over a time interval; the trader maximizes an expected utility under the constraint that the position be fully closed by terminal time. Since the asset price is…
We consider the hedging error of a derivative due to discrete trading in the presence of a drift in the dynamics of the underlying asset. We suppose that the trader wishes to find rebalancing times for the hedging portfolio which enable him…
In a classical optimal stopping problem the aim is to maximize the expected value of a functional of a diffusion evaluated at a stopping time. This note considers optimal stopping problems beyond this paradigm. We study problems in which…
This paper includes an original self contained proof of well-posedness of an initial-boundary value problem involving a non-local parabolic PDE which naturally arises in the study of derivative pricing in a generalized market model. We call…
We study perpetual American option pricing problems in an extension of the Black-Merton-Scholes model in which the dividend and volatility rates of the underlying risky asset depend on the running values of its maximum and maximum drawdown.…
In this work, we study the optimal discretization error of stochastic integrals, in the context of the hedging error in a multidimensional It\^{o} model when the discrete rebalancing dates are stopping times. We investigate the convergence,…
This paper studies four trading algorithms of a professional trader at a multilateral trading facility, observing a realistic two-sided limit order book whose dynamics are driven by the order book events. The identity of the trader can be…
Inspired by Strotz's consistent planning strategy, we formulate the infinite horizon mean-variance stopping problem as a subgame perfect Nash equilibrium in order to determine time consistent strategies with no regret. Equilibria among…
We study a problem when a solution to optimal stopping problem for one-dimensional diffusion will generate by threshold strategy. Namely, we give necessary and sufficient conditions under which an optimal stopping time can be specified as…