Related papers: Trading Lightly: Cross-Impact and Optimal Portfoli…
We studied the behavior and variation of utility between the two conflicting players in a closed Nash-equilibrium loop. Our modeling approach also captured the nexus between optimal premium strategizing and firm performance using the…
We present a framework for hedging a portfolio of derivatives in the presence of market frictions such as transaction costs, market impact, liquidity constraints or risk limits using modern deep reinforcement machine learning methods. We…
We study a multi-player stochastic differential game, where agents interact through their joint price impact on an asset that they trade to exploit a common trading signal. In this context, we prove that a closed-loop Nash equilibrium…
This work is about optimal order execution, where a large order is split into several small orders to maximize the implementation shortfall. Based on the diversity of cryptocurrency exchanges, we attempt to extract cross-exchange signals by…
The potential of machine learning to automate and control nonlinear, complex systems is well established. These same techniques have always presented potential for use in the investment arena, specifically for the managing of equity…
Finding Bertram's optimal trading strategy for a pair of cointegrated assets following the Ornstein--Uhlenbeck price difference process can be formulated as an unconstrained convex optimization problem for maximization of expected profit…
We study the behavior of simple models for financial markets with widely spread frequency either in the trading activity of agents or in the occurrence of basic events. The generic picture of a phase transition between information efficient…
Dealers in foreign exchange markets provide bid and ask prices to their clients at which they are happy to buy and sell, respectively. To manage risk, dealers can skew their quotes and hedge in the interbank market. Hedging offers certainty…
The practice of valuation by marking-to-market with current trading prices is seriously flawed. Under leverage the problem is particularly dramatic: due to the concave form of market impact, selling always initially causes the expected…
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…
We study the optimal order placement strategy with the presence of a liquidity cost. In this problem, a stock trader wishes to clear her large inventory by a predetermined time horizon $T$. A trader uses both limit and market orders, and a…
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…
We present a cross-market algorithmic trading system that balances execution quality with rigorous compliance enforcement. The architecture comprises a high-level planner, a reinforcement learning execution agent, and an independent…
We extend the "No-dynamic-arbitrage and market impact"-framework of Jim Gatheral [Quantitative Finance, 10(7): 749-759 (2010)] to the multi-dimensional case where trading in one asset has a cross-impact on the price of other assets. From…
The goal of this work is to study binary market models with transaction costs, and to characterize their arbitrage opportunities. It has been already shown that the absence of arbitrage is related to the existence of \lambda-consistent…
Systemic risk arises as a multi-layer network phenomenon. Layers represent direct financial exposures of various types, including interbank liabilities, derivative- or foreign exchange exposures. Another network layer of systemic risk…
We propose a game-theoretic framework to study the outcomes of packetized payments, a cross-ledger transaction protocol, with strategic and possibly malicious agents. We derive the transaction failure rate and demonstrate that without…
The instability of historical risk factor correlations renders their use in estimating portfolio risk extremely questionable. In periods of market stress correlations of risk factors have a tendency to quickly go well beyond estimated…
In this paper, we study which data can be induced by a correlated equilibrium given a known finite simultaneous move game. We assume that an analyst has access to the frequency of each agent's actions but does not have access to the…
In this paper we introduce and analyse, from a game theoretical perspective, several multi-agent or multi-item continuous review inventory models in which the buyers are exempted from ordering costs if the price of their orders is greater…