Related papers: Incorporating Signals into Optimal Trading
With the increasing integration of power plants into the frequency-regulation markets, the importance of optimal trading has grown substantially. This paper conducts an in-depth analysis of their optimal trading behavior in sequential…
We analyze an optimal trade execution problem in a financial market with stochastic liquidity. To this end we set up a limit order book model in which both order book depth and resilience evolve randomly in time. Trading is allowed in both…
We develop a new market-making model, from the ground up, which is tailored towards high-frequency trading under a limit order book (LOB), based on the well-known classification of order types in market microstructure. Our flexible…
High-frequency trading requires fast data processing without information lags for precise stock price forecasting. This high-paced stock price forecasting is usually based on vectors that need to be treated as sequential and…
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…
A great deal of academic and theoretical work has been dedicated to optimal liquidation of large orders these last twenty years. The optimal split of an order through time (`optimal trade scheduling') and space (`smart order routing') is of…
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…
Trailing stop is a popular stop-loss trading strategy by which the investor will sell the asset once its price experiences a pre-specified percentage drawdown. In this paper, we study the problem of timing buy and then sell an asset subject…
We consider a one-period Kyle (1985) framework where the insider can be subject to a penalty if she trades. We establish existence and uniqueness of equilibrium for virtually any penalty function when noise is uniform. In equilibrium, the…
Optimal trading strategies for pairs trading have been studied by models that try to find either optimal shares of stocks by assuming no transaction costs or optimal timing of trading fixed numbers of shares of stocks with transaction…
In this paper we develop a statistical arbitrage trading strategy with two key elements in hi-frequency trading: stop-loss and leverage. We consider, as in Bertram (2009), a mean-reverting process for the security price with proportional…
We revisit optimal execution of an active portfolio in the presence of slippage (aka linear, proportional, or absolute-value) costs. Market efficiency implies a close balance between active alphas and trading costs, so even small changes to…
We compare optimal static and dynamic solutions in trade execution. An optimal trade execution problem is considered where a trader is looking at a short-term price predictive signal while trading. When the trader creates an instantaneous…
The aim of this paper is to compare the performances of the optimal strategy under parameters mis-specification and of a technical analysis trading strategy. The setting we consider is that of a stochastic asset price model where the trend…
High-frequency trading is prevalent, where automated decisions must be made quickly to take advantage of price imbalances and patterns in price action that forecast near-future movements. While many algorithms have been explored and tested,…
This paper extends the optimal-trading framework developed in arXiv:2409.03586v1 to compute optimal strategies with real-world constraints. The aim of the current paper, as with the previous, is to study trading in the context of…
Minimizing execution costs for large orders is a fundamental challenge in finance. Firms often depend on brokers to manage their trades due to limited internal resources for optimizing trading strategies. This paper presents a methodology…
Non-equilibrium phenomena occur not only in physical world, but also in finance. In this work, stochastic relaxational dynamics (together with path integrals) is applied to option pricing theory. A recently proposed model (by Ilinski et…
An increasing share of energy is produced from renewable sources by many small producers. The efficiency of those sources is volatile and, to some extent, random, exacerbating the problem of energy market balancing. In many countries, this…
Reinforcement learning is explored as a candidate machine learning technique to enhance existing analytical solutions for optimal trade execution with elements from the market microstructure. Given a volume-to-trade, fixed time horizon and…