Related papers: Stop-loss and Leverage in optimal Statistical Arbi…
A leveraged exchange traded fund (LETF) is an exchange traded fund that uses financial derivatives to amplify the price changes of a basket of goods. In this paper, we consider the robust hedging of European options on a LETF, finding…
As the share of variable renewable energy sources increases in the electricity mix, new solutions are needed to build a flexible and reliable grid. Energy arbitrage with battery storage systems supports renewable energy integration into the…
We propose a pairs trading model that incorporates a time-varying volatility of the Constant Elasticity of Variance type. Our approach is based on stochastic control techniques; given a fixed time horizon and a portfolio of two…
We formulate the optimal energy arbitrage problem for a piecewise linear cost function for energy storage devices using linear programming (LP). The LP formulation is based on the equivalent minimization of the epigraph. This formulation…
In this paper, the optimal mean-reverting portfolio (MRP) design problem is considered, which plays an important role for the statistical arbitrage (a.k.a. pairs trading) strategy in financial markets. The target of the optimal MRP design…
This paper presents a comprehensive analytical study of two competitive cognitive operators' spectrum leasing and pricing strategies, taking into account operators' heterogeneity in leasing costs and users' heterogeneity in transmission…
This paper addresses the following question which is of interest in designing efficient exclusive-use spectrum licenses sold through spectrum auctions. Given a system model in which customer demand, revenue, and bids of wireless operators…
We consider a dynamic portfolio optimization problem that incorporates predictable returns, instantaneous transaction costs, price impact, and stochastic volatility, extending the classical results of Garleanu and Pedersen (2013), which…
In this article, we introduce an algorithm called Backward Hedging, designed for hedging European and American options while considering transaction costs. The optimal strategy is determined by minimizing an appropriate loss function, which…
Decentralized exchanges using automated market makers create arbitrage opportunities with centralized exchanges, where gas fees and transaction ordering are critical. Existing models largely overlook competition among arbitrageurs, despite…
A speculative agent with Prospect Theory preference chooses the optimal time to purchase and then to sell an indivisible risky asset to maximize the expected utility of the round-trip profit net of transaction costs. The optimization…
We propose a hedging approach for general contingent claims when liquidity is a concern and trading is subject to transaction cost. Multiple assets with different liquidity levels are available for hedging. Our risk criterion targets a…
In Electricity markets, illiquidity, transaction costs and market price characteristics prevent managers to replicate exactly contracts. A residual risk is always present and the hedging strategy depends on a risk criterion chosen. We…
It is shown that delta hedging provides the optimal trading strategy in terms of minimal required initial capital to replicate a given terminal payoff in a continuous-time Markovian context. This holds true in market models where no…
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…
This research presents a comprehensive framework for analyzing liquidity in financial markets, particularly in the context of high-frequency trading. By leveraging advanced machine learning classification techniques, including Logistic…
The problem of stock hedging is reconsidered in this paper, where a put option is chosen from a set of available put options to hedge the market risk of a stock. A formula is proposed to determine the probability that the potential loss…
Stochastic resetting is a driving mechanism that is known to minimize the first passage time to reach a target, at the cost of energy expenditure. The choice of the physical implementation of each resetting event determines the tradeoff…
When prices reflect all available information, they oscillate around an equilibrium level. This oscillation is the result of the temporary market impact caused by waves of buyers and sellers. This price behavior can be approximated through…
In this study we prove the existence of statistical arbitrage opportunities in the Black-Scholes framework by considering trading strategies that consists of borrowing from the risk free rate and taking a long position in the stock until it…