Related papers: Trading Lightly: Cross-Impact and Optimal Portfoli…

We prove the existence of a continuous-time Radner equilibrium with multiple agents and transaction costs. The agents are incentivized to trade towards a targeted number of shares throughout the trading period and seek to maximize their…

This paper presents a new model for pricing financial derivatives subject to collateralization. It allows for collateral arrangements adhering to bankruptcy laws. As such, the model can back out the market price of a collateralized…

We propose a discrete time algorithm for the valuation of employee stock options based on exponential indifference prices and taking into account both the possibility of partial exercise of a fraction of the options and the use of a…

Based on a recent theorem due to the authors, it is shown how the extreme tail dependence between an asset and a factor or index or between two assets can be easily calibrated. Portfolios constructed with stocks with minimal tail dependence…

We develop a theory for the market impact of large trading orders, which we call metaorders because they are typically split into small pieces and executed incrementally. Market impact is empirically observed to be a concave function of…

Constant and symmetric price impact functions, most commonly used in agent-based market modelling, are shown to give rise to paradoxical and inconsistent outcomes in the simplest case of arbitrage exploitation when open-hold-close actions…

The paper studies sub and super-replication price bounds for contingent claims defined on general trajectory based market models. No prior probabilistic or topological assumptions are placed on the trajectory space, trading is assumed to…

We study the problem of dynamically trading multiple futures contracts with different underlying assets. To capture the joint dynamics of stochastic bases for all traded futures, we propose a new model involving a multi-dimensional scaled…

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…

We consider the problem of maximizing portfolio value when an agent has a subjective view on asset value which differs from the traded market price. The agent's trades will have a price impact which affect the price at which the asset is…

Over-the-counter derivatives have contributed significantly to the effectiveness and efficiency of the international financial system but also entail significant counterparty credit risk. Collateralization is one of the most important and…

A trading system is said to be {robust} if it generates a robust return regardless of market direction. To this end, a consistently positive expected trading gain is often used as a robustness metric for a trading system. In this paper, we…

Crowding is widely regarded as one of the most important risk factors in designing portfolio strategies. In this paper, we analyze stock crowding using network analysis of fund holdings, which is used to compute crowding scores for stocks.…

We introduce a practical, interactive simulator of the limit order book for large-tick assets, designed to produce realistic execution, costs, and P&L. The book state is projected onto a tractable representation based on spread and volume…

Using a large database of 8 million institutional trades executed in the U.S. equity market, we establish a clear crossover between a linear market impact regime and a square-root regime as a function of the volume of the order. Our…

This paper performs the numerical analysis and the computation of a Spread option in a market with imperfect liquidity. The number of shares traded in the stock market has a direct impact on the stock's price. Thus, we consider a…

We consider a class of generalized capital asset pricing models in continuous time with a finite number of agents and tradable securities. The securities may not be sufficient to span all sources of uncertainty. If the agents have…

In this short note, we will show how to optimize the portfolio of a large trader whose hedging strategy affects the price of his assets.

As demonstrated during the recent financial crisis, regulators require additional analytical tools to assess systemic risk in the financial sector. This paper describes one such tool; namely a novel market modeling and analysis capability.…

Decisions on how to manage future flood risks are frequently informed by both sophisticated and computationally expensive models. This complexity often limits the representation of uncertainties and the consideration of strategies. Here, we…