Related papers: Optimal placement of a small order in a diffusive …
This paper deals with an optimal position management problem for a market maker who has to face uncertain customer order flows in an illiquid market, where the market maker's continuous trading incurs a stochastic linear price impact.…
We consider an investor that trades continuously and wants to liquidate an initial asset position within a prescribed time interval. During the execution of the liquidation order the investor is subject to execution risk. We study the…
We study how to unwind stochastic order flow with minimal transaction costs. Stochastic order flow arises, e.g., in the central risk book (CRB), a centralized trading desk that aggregates order flows within a financial institution. The desk…
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…
The paper deals with an optimal control problem in a dynamical system described by a linear differential equation with the Caputo fractional derivative. The goal of control is to minimize a Bolza-type cost functional, which consists of two…
This paper develops a unified explicit solution theory for optimal execution through sequential limit-order placement in a limit order book. Rather than controlling only the trading speed of a metaorder, we determine how individual limit…
It has been recently established that a deterministic infinite horizon discounted optimal control problem in discrete time is closely related to a certain infinite dimensional linear programming problem and its dual. In the present paper,…
In financial markets, the order flow, defined as the process assuming value one for buy market orders and minus one for sell market orders, displays a very slowly decaying autocorrelation function. Since orders impact prices, reconciling…
We consider the hedging error of a derivative due to discrete trading in the presence of a drift in the dynamics of the underlying asset. We suppose that the trader wishes to find rebalancing times for the hedging portfolio which enable him…
We give new approximation algorithms for the submodular joint replenishment problem and the inventory routing problem, using an iterative rounding approach. In both problems, we are given a set of $N$ items and a discrete time horizon of…
We introduce the optimal obstacle placement with disambiguations problem wherein the goal is to place true obstacles in an environment cluttered with false obstacles so as to maximize the total traversal length of a navigating agent (NAVA).…
This paper describes the structure of optimal policies for discounted periodic-review single-commodity total-cost inventory control problems with fixed ordering costs for finite and infinite horizons. There are known conditions in the…
The paper considers the optimal control problem of inventory of a discrete product in regeneration scheme with a Poisson flow of customer requirements. In the system deferred demand is allowed, the volume of which is limited by a given…
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…
We propose a model for the dynamics of a limit order book in a liquid market where buy and sell orders are submitted at high frequency. We derive a functional central limit theorem for the joint dynamics of the bid and ask queues and show…
We study an optimal execution strategy for purchasing a large block of shares over a fixed time horizon. The execution problem is subject to a general price impact that gradually dissipates due to market resilience. We allow for general…
In this paper we address the problem of optimal liquidation of a large portfolio composed by securities exposed to default risk. The default time is described in terms of a Brownian motion representing the evolution of the value of the…
The growing need for companies to reduce costs and maximize profits has led to an increased focus on logistics activities. Among these, inventory management plays a crucial role in minimizing organizational expenses by optimizing the…
Small-to-medium size enterprises (SMEs), including many startup firms, need to manage interrelated flows of cash and inventories of goods. In this paper, we model a firm that can finance its inventory (ordered or manufactured) with loans in…
In this paper we study a continuous time stochastic inventory model for a commodity traded in the spot market and whose supply purchase is affected by price and demand uncertainty. A firm aims at meeting a random demand of the commodity at…