Related papers: Incorporating Signals into Optimal Trading
This research aims to demonstrate a dynamic cointegration-based pairs trading strategy, including an optimal look-back window framework in the cryptocurrency market, and evaluate its return and risk by applying three different scenarios. We…
We propose a framework for studying optimal market making policies in a limit order book (LOB). The bid-ask spread of the LOB is modelled by a Markov chain with finite values, multiple of the tick size, and subordinated by the Poisson…
In a fixed time horizon, appropriately executing a large amount of a particular asset -- meaning a considerable portion of the volume traded within this frame -- is challenging. Especially for illiquid or even highly liquid but also highly…
The focus of this paper is on identifying the most effective selling strategy for pairs trading of stocks. In pairs trading, a long position is held in one stock while a short position is held in another. The goal is to determine the…
We study several optimal stopping problems that arise from trading a mean-reverting price spread over a finite horizon. Modeling the spread by the Ornstein-Uhlenbeck process, we analyze three different trading strategies: (i) the long-short…
In this paper we introduce a completely continuous and time-variate model of the evolution of market limit orders based on the existence, uniqueness, and regularity of the solutions to a type of stochastic partial differential equations…
Optimal execution of a portfolio have been a challenging problem for institutional investors. Traders face the trade-off between average trading price and uncertainty, and traditional methods suffer from the curse of dimensionality. Here,…
This paper examines the role of algorithmic trading in modern financial markets. Additionally, order types, characteristics, and special features of algorithmic trading are described under the lens provided by the large development of high…
The report presents with the development and optimisation of an enhanced algorithmic trading strategy through the use of historical S&P 500 market data and earnings call sentiment analysis. The proposed strategy integrates various technical…
Whether you trade futures for yourself or a hedge fund, your strategy is counted. Long and short position limits make the number of unique strategies finite. Formulas of the numbers of strategies, transactions, do nothing actions are…
We introduce a novel approach to options trading strategies using a highly scalable and data-driven machine learning algorithm. In contrast to traditional approaches that often require specifications of underlying market dynamics or…
Optimal control models for limit order trading often assume that the underlying asset price is a Brownian motion since they deal with relatively short time scales. The resulting optimal bid and ask limit order prices tend to track the…
Dynamic trading strategies, in the spirit of trend-following or mean-reversion, represent an only partly understood but lucrative and pervasive area of modern finance. Assuming Gaussian returns and Gaussian dynamic weights or signals,…
Calibrating a trading rule using a historical simulation (also called backtest) contributes to backtest overfitting, which in turn leads to underperformance. In this paper we propose a procedure for determining the optimal trading rule…
A pair trade is a portfolio consisting of a long position in one asset and a short position in another, and it is a widely applied investment strategy in the financial industry. Recently, Ekstr\"om, Lindberg and Tysk studied the problem of…
A hypothetical risk-neutral agent who trades to maximize the expected profit of the next trade will approximately exhibit long-term optimal behavior as long as this agent uses the vector $p = \nabla V (t, x)$ as effective microstructure…
We study the optimal timing strategies for trading a mean-reverting price process with afinite deadline to enter and a separate finite deadline to exit the market. The price process is modeled by a diffusion with an affine drift that…
In this work, we consider the optimal portfolio selection problem under hard constraints on trading volume amounts when the dynamics of the risky asset returns are governed by a discrete-time approximation of the Markov-modulated geometric…
Optimal execution, i.e., the determination of the most cost-effective way to trade volumes in continuous trading sessions, has been a topic of interest in the equity trading world for years. Electricity intraday trading slowly follows this…
We consider the optimal solutions to the trade execution problem in the two different classes of i) fully adapted or adaptive and ii) deterministic or static strategies, comparing them. We do this in two different benchmark models. The…