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

We consider the problem of hedging a European contingent claim in a Bachelier model with transient price impact as proposed by Almgren and Chriss. Following the approach of Rogers and Singh and Naujokat and Westray, the hedging problem can…

We propose a general interpretation for long-range correlation effects in the activity and volatility of financial markets. This interpretation is based on the fact that the choice between `active' and `inactive' strategies is subordinated…

We introduce a new stochastic duration model for transaction times in asset markets. We argue that widely accepted rules for aggregating seemingly related trades mislead inference pertaining to durations between unrelated trades: while any…

This study investigates two models of varying complexity for optimizing intraday arbitrage energy trading of a battery energy storage system using a model predictive control approach. Scenarios reflecting different stages of the system's…

Diversification of an investment into independently fluctuating assets reduces its risk. In reality, movement of assets are are mutually correlated and therefore knowledge of cross--correlations among asset price movements are of great…

We consider a dynamic portfolio optimization problem that incorporates predictable returns, instantaneous transaction costs, price impact, and stochastic volatility, extending the classical results of Garleanu and Pedersen (2013), which…

This paper studies repeated games where two players play multiple duopolistic games simultaneously (multimarket contact). A key assumption is that each player receives a noisy and private signal about the other's actions (private monitoring…

Pairs trading, a strategy that capitalizes on price movements of asset pairs driven by similar factors, has gained significant popularity among traders. Common practice involves selecting highly cointegrated pairs to form a portfolio, which…

Portfolio optimisation is essential in quantitative investing, but its implementation faces several practical difficulties. One particular challenge is converting optimal portfolio weights into real-life trades in the presence of realistic…

In this short note, we consider mean-variance optimized portfolios with transaction costs. We show that introducing quadratic transaction costs makes the optimization problem more difficult than using linear transaction costs. The reason…

Financial markets are nonlinear with complexity, where different types of assets are traded between buyers and sellers, each having a view to maximize their Return on Investment (ROI). Forecasting market trends is a challenging task since…

The downside risk of a portfolio of (equity)assets is generally substantially higher than the downside risk of its components. In particular in times of crises when assets tend to have high correlation, the understanding of this difference…

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…

The time proximity of trades across stocks reveals interesting topological structures of the equity market in the United States. In this article, we investigate how such concurrent cross-stock trading behaviors, which we denote as…

We develop a dynamic trading strategy in the Linear Quadratic Regulator (LQR) framework. By including a price mean-reversion signal into the optimization program, in a trading environment where market impact is linear and stage costs are…

We investigate the portfolio execution problem under a framework in which volatility and liquidity are both uncertain. In our model, we assume that a multidimensional Markovian stochastic factor drives both of them. Moreover, we model…

We study an optimal execution strategy for purchasing a large block of shares over a fixed time horizon. The execution problem is subject to a general price impact that gradually dissipates due to market resilience. We allow for general…

Financial contagion has been widely recognized as a fundamental risk to the financial system. Particularly potent is price-mediated contagion, wherein forced liquidations by firms depress asset prices and propagate financial stress,…

A simple trading model based on pair pattern strategy space with holding periods is proposed. Power-law behaviors are observed for the return variance $\sigma^2$, the price impact $H$ and the predictability $K$ for both models with linear…

We consider a market consisting of one safe and one risky asset, which offer constant investment opportunities. Taking into account both proportional transaction costs and linear price impact, we derive optimal rebalancing policies for…