Related papers: Incorporating Signals into Optimal Trading
This paper studies a portfolio optimization problem in a discrete-time Markovian model of a financial market, in which asset price dynamics depend on an external process of economic factors. There are transaction costs with a structure that…
We formulate an equilibrium model of intraday trading in electricity markets. Agents face balancing constraints between their customers consumption plus intraday sales and their production plus intraday purchases. They have continuously…
This paper studies a robust portfolio optimization problem under the multi-factor volatility model introduced by Christoffersen et al. (2009). The optimal strategy is derived analytically under the worst-case scenario with or without…
This paper is concerned with an optimal strategy for simultaneously trading a pair of stocks. The idea of pairs trading is to monitor their price movements and compare their relative strength over time. A pairs trade is triggered by the…
This paper introduced key aspects of applying Machine Learning (ML) models, improved trading strategies, and the Quasi-Reversibility Method (QRM) to optimize stock option forecasting and trading results. It presented the findings of the…
We present a deep long short-term memory (LSTM)-based neural network for predicting asset prices, together with a successful trading strategy for generating profits based on the model's predictions. Our work is motivated by the fact that…
When stock prices are observed at high frequencies, more information can be utilized in estimation of parameters of the price process. However, high-frequency data are contaminated by the market microstructure noise which causes significant…
The problem of determining the European-style option price in the incomplete market has been examined within the framework of stochastic optimization. An analytic method based on the discrete dynamic programming equation (Bellman equation)…
This paper studies the optimal risk-averse timing to sell a risky asset. The investor's risk preference is described by the exponential, power, or log utility. Two stochastic models are considered for the asset price -- the geometric…
This work extends a previous work in regime detection, which allowed trading positions to be profitably adjusted when a new regime was detected, to ex ante prediction of regimes, leading to substantial performance improvements over the…
This paper studies the problem of trading futures with transaction costs when the underlying spot price is mean-reverting. Specifically, we model the spot dynamics by the Ornstein-Uhlenbeck (OU), Cox-Ingersoll-Ross (CIR), or exponential…
We derive an explicit solution for deterministic market impact parameters in the Graewe and Horst (2017) portfolio liquidation model. The model allows to combine various forms of market impact, namely instantaneous, permanent and temporary.…
We study the high-frequency limit of an $n$-trader optimal execution game in discrete time. Traders face transient price impact of Obizhaeva--Wang type in addition to quadratic instantaneous trading costs $\theta(\Delta X_t)^2$ on each…
Optimal pricing of European call option is described by linear stochastic differential equation. Trading strategy given by a twin of stochastic variables was integrated w.r.t. Black-Scholes formula to adopt optimal pricing to tarading…
This work focuses on the mathematical study of constant function market makers. We rigorously establish the conditions for optimal trading under the assumption of a quasilinear, but not necessarily convex (or concave), trade function. This…
Because of the theoretical challenges posed by the Efficient Market Hypothesis to technical analysis, the effectiveness of technical indicators in high-frequency trading remains inadequately explored, particularly at the minute-level…
We consider the problem of optimal investment in a market with two cointegrated stocks and an agent with CRRA utility. We extend the findings of Liu and Timmermann [The Review of Financial Studies, 26(4):1048-1086, 2013] by paying special…
In a two-period financial market where a stock is traded dynamically and European options at maturity are traded statically, we study the so-called martingale Schr\"odinger bridge Q*; that is, the minimal-entropy martingale measure among…
Algorithmic trading relies on extracting meaningful signals from diverse financial data sources, including candlestick charts, order statistics on put and canceled orders, traded volume data, limit order books, and news flow. While deep…
We study the optimal timing of derivative purchases in incomplete markets. In our model, an investor attempts to maximize the spread between her model price and the offered market price through optimally timing her purchase. Both the…