Related papers: Equilibrium Returns with Transaction Costs
We study equilibrium feedback strategies for a family of dynamic mean-variance problems with competition among a large group of agents. We assume that the time horizon is random and each agent's risk aversion depends dynamically on the…
High Frequency Trading (HFT) represents an ever growing proportion of all financial transactions as most markets have now switched to electronic order book systems. The main goal of the paper is to propose continuous time equations which…
We introduce an interactive market setup with sequential auctions where agents receive variegated signals with a known deadline. The effects of differential information and mutual learning on the allocation of overall profit \& loss (P\&L)…
The timing of strategic exit is one of the most important but difficult business decisions, especially under competition and uncertainty. Motivated by this problem, we examine a stochastic game of exit in which players are uncertain about…
This paper studies an asset pricing model in a partially observable market with a large number of heterogeneous agents using the mean field game theory. In this model, we assume that investors can only observe stock prices and must infer…
We study a goal-based portfolio selection problem in which an investor aims to meet multiple financial goals, each with a specific deadline and target amount. Trading the stock incurs a strictly positive transaction cost. Using the…
We analyse the effect of a proportional wealth tax on asset returns, portfolio choice, and asset pricing. The tax is levied annually on the market value of all holdings at a uniform rate. We show that such a tax is economically equivalent…
Motivated by the literature on investment flows and optimal trading, we examine intraday predictability in the cross-section of stock returns. We find a striking pattern of return continuation at half-hour intervals that are exact multiples…
Explicit robust hedging strategies for convex or concave payoffs under a continuous semimartingale model with uncertainty and small transaction costs are constructed. In an asymptotic sense, the upper and lower bounds of the cumulative…
We consider a class of generalized capital asset pricing models in continuous time with a finite number of agents and tradable securities. The securities may not be sufficient to span all sources of uncertainty. If the agents have…
We show that the problem of existence of equilibrium in Kyle's continuous time insider trading model can be tackled by considering a forward-backward system coupled via an optimal transport type constraint at maturity. The forward component…
We explore a decomposition in which returns on a large class of portfolios relative to the market depend on a smooth non-negative drift and changes in the asset price distribution. This decomposition is obtained using general continuous…
In the present work we develop a formalism to tackle the problem of optimal execution when trading market securities. More precisely, we introduce a utility function that balances market impact and timing risk, with this last being modelled…
This paper develops a comprehensive theoretical framework that imports concepts from stochastic thermodynamics to model price impact and characterize the feasibility of round-trip arbitrage in financial markets. A trading cycle is treated…
We study portfolio selection in a model with both temporary and transient price impact introduced by Garleanu and Pedersen (2016). In the large-liquidity limit where both frictions are small, we derive explicit formulas for the…
In this paper, both dynamic mean-variance portfolio selection problems and dynamic variance hedging problems are discussed under non-Markovian framework. Explicit closed-loop equilibrium strategies of these problems are respectively…
We combine general equilibrium theory and theorie generale of stochastic processes to derive structural results about equilibrium state prices.
In a continuous time stochastic economy, this paper considers the problem of consumption and investment in a financial market in which the representative investor exhibits a change in the discount rate. The investment opportunities are a…
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 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…