Related papers: Trading Strategies with Position Limits

In commodity markets the convergence of futures towards spot prices, at the expiration of the contract, is usually justified by no-arbitrage arguments. In this article, we propose an alternative approach that relies on the expected profit…

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…

We introduce a new framework to model interactions among agents which seek to trade to minimize their risk with respect to some future outcome. We quantify this risk using the concept of risk measures from finance, and introduce a class of…

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…

The usual theory of asset pricing in finance assumes that the financial strategies, i.e. the quantity of risky assets to invest, are real-valued so that they are not integer-valued in general, see the Black and Scholes model for instance.…

We study the optimal timing strategies for trading a mean-reverting price process with afinite deadline to enter and a separate finite deadline to exit the market. The price process is modeled by a diffusion with an affine drift that…

In this paper we develop a model of an order-driven market where traders set bids and asks and post market or limit orders according to exogenously fixed rules. Agents are assumed to have three components to the expectation of future asset…

We investigate activities that have different periods of duration. We define the profit intensity as a measure of this economic category. The profit intensity in a repeated trading has a unique property of attaining its maximum at a fixed…

We explore various extensions of Challet and Zhang's Minority Game in an attempt to gain insight into the dynamics underlying financial markets. First we consider a heterogeneous population where individual traders employ differing `time…

We investigate the impact of capital gains taxes on optimal investment decisions in a quite simple model. Namely, we consider a risk neutral investor who owns one risky stock from which she assumes that it has a lower expected return than…

We present a new microscopic stochastic model for an ensemble of interacting investors that buy and sell stocks in discrete time steps via limit orders based on individual forecasts about the price of the stock. These orders determine the…

The objective of the note is to remind readers on how self-financing works in Quantitative Finance. The authors have observed continuing uncertainty on this issue which may be because it lies exactly at the intersection of stochastic…

Although there is a wide use of technical trading rules in stock markets, the profitability of them still remains controversial. This paper first presents and proves the upper bound of cumulative return, and then introduces many of…

We consider an equity-linked contract whose payoff depends on the lifetime of policy holder and the stock price. We assume the limited capital for hedging and we provide with the best strategy for an insurance company in the meaning of so…

We study the optimal order placement strategy with the presence of a liquidity cost. In this problem, a stock trader wishes to clear her large inventory by a predetermined time horizon $T$. A trader uses both limit and market orders, and a…

We analyze an optimal trade execution problem in a financial market with stochastic liquidity. To this end we set up a limit order book model in which both order book depth and resilience evolve randomly in time. Trading is allowed in both…

In this paper we explore the specific role of randomness in financial markets, inspired by the beneficial role of noise in many physical systems and in previous applications to complex socio- economic systems. After a short introduction, we…

This paper investigates the optimal hedging strategies of an informed broker interacting with multiple traders in a financial market. We develop a theoretical framework in which the broker, possessing exclusive information about the drift…

In this research, we develop a trading strategy for the discrete-time optimal liquidation problem of large order trading with different market microstructures in an illiquid market. In this framework, the flow of orders can be viewed as a…

A common assumption in financial engineering is that the market price for any derivative coincides with an objectively defined risk-neutral price - a plausible assumption only if traders collectively possess objective knowledge about the…