Related papers: Incorporating Signals into Optimal Trading
We study optimal trade execution strategies in financial markets with discrete order flow. The agent has a finite liquidation horizon and must minimize price impact given a random number of incoming trade counterparties. Assuming that the…
Technical indicators use graphic representations of data sets by applying various mathematical formulas to financial time series of prices. These formulas comprise a set of rules and parameters whose values are not necessarily known and…
This paper studies four trading algorithms of a professional trader at a multilateral trading facility, observing a realistic two-sided limit order book whose dynamics are driven by the order book events. The identity of the trader can be…
The study seeks to develop an effective strategy based on the novel framework of statistical arbitrage based on graph clustering algorithms. Amalgamation of quantitative and machine learning methods, including the Kelly criterion, and an…
Rough stochastic volatility models have attracted a lot of attentions recently, in particular for the linear option pricing problem. In this paper, starting with power utilities, we propose to use a martingale distortion representation of…
The principal portfolio approach is an emerging method in signal-based trading. However, these principal portfolios may not be diversified to explore the key features of the prediction matrix or robust to different situations. To address…
This article explores the optimisation of trading strategies in Constant Function Market Makers (CFMMs) and centralised exchanges. We develop a model that accounts for the interaction between these two markets, estimating the conditional…
This paper constructs optimal brokerage contracts for multiple (heterogeneous) clients trading a single asset whose price follows the Almgren-Chriss model. The distinctive features of this work are as follows: (i) the reservation values of…
We consider a simplified model for optimizing a single-asset portfolio in the presence of transaction costs given a signal with a certain autocorrelation and cross-correlation structure. In our setup, the portfolio manager is given two…
We study the problem of dynamically trading a futures contract and its underlying asset under a stochastic basis model. The basis evolution is modeled by a stopped scaled Brownian bridge to account for non-convergence of the basis at…
We conduct a preliminary analysis of a pairs trading strategy using the Ornstein-Uhlenbeck (OU) process to model stock price spreads. We compare this approach to a naive pairs trading strategy that uses a rolling window to calculate mean…
Technical trading represents a class of investment strategies for Financial Markets based on the analysis of trends and recurrent patterns of price time series. According standard economical theories these strategies should not be used…
The Efficient Market Hypothesis has been a staple of economics research for decades. In particular, weak-form market efficiency -- the notion that past prices cannot predict future performance -- is strongly supported by econometric…
The aim of this paper is the analysis and selection of stock trading systems that combine different models with data of different nature, such as financial and microeconomic information. Specifically, based on previous work by the authors…
In this paper, we introduce a novel reinforcement learning framework for optimal trade execution in a limit order book. We formulate the trade execution problem as a dynamic allocation task whose objective is the optimal placement of market…
This paper presents an equilibrium model of dynamic trading, learning, and pricing by strategic investors with trading targets and price impact. Since trading targets are private, rebalancers and liquidity providers filter the child order…
In financial markets, liquidity is not constant over time but exhibits strong seasonal patterns. In this article we consider a limit order book model that allows for time-dependent, deterministic depth and resilience of the book and…
Assuming geometric Brownian motion as unaffected price process $S^0$, Gatheral & Schied (2011) derived a strategy for optimal order execution that reacts in a sensible manner on market changes but can still be computed in closed form. Here…
We assume a continuous-time price impact model similar to Almgren-Chriss but with the added assumption that the price impact parameters are stochastic processes modeled as correlated scalar Markov diffusions. In this setting, we develop…
Predicting trends in stock market prices has been an area of interest for researchers for many years due to its complex and dynamic nature. Intrinsic volatility in stock market across the globe makes the task of prediction challenging.…