Related papers: Optimal liquidity-based trading tactics
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…
In financial markets, agents often mutually influence each other's investment strategies and adjust their strategies to align with others. However, there is limited quantitative study of agents' investment strategies in such scenarios. In…
In this paper we investigate a new class of growth rate maximization problems based on impulse control strategies such that the average number of trades per time unit does not exceed a fixed level. Moreover, we include proportional…
This paper deals with numerical solutions to an impulse control problem arising from optimal portfolio liquidation with bid-ask spread and market price impact penalizing speedy execution trades. The corresponding dynamic programming (DP)…
The main objective of this paper is to provide an optimized solution and algorithm for the execution of a workflow process by ensuring the data consistency, correctness, completeness among various tasks involved. The solution proposed…
We develop a new market-making model, from the ground up, which is tailored towards high-frequency trading under a limit order book (LOB), based on the well-known classification of order types in market microstructure. Our flexible…
This paper addresses the optimal scheduling of the liquidation of a portfolio using a new angle. Instead of focusing only on the scheduling aspect like Almgren and Chriss, or only on the liquidity-consuming orders like Obizhaeva and Wang,…
We consider a popular model of microeconomics with countably many assets: the Arbitrage Pricing Model. We study the problem of optimal investment under an expected utility criterion and look for conditions ensuring the existence of optimal…
We study a linear price impact model including other liquidity takers, whose flow of orders either follows a Poisson or a Hawkes process. The optimal execution problem is solved explicitly in this context, and the closed-formula optimal…
We solve explicitly a two-dimensional singular control problem of finite fuel type for infinite time horizon. The problem stems from the optimal liquidation of an asset position in a financial market with multiplicative and transient price…
We consider the problem of maximizing portfolio value when an agent has a subjective view on asset value which differs from the traded market price. The agent's trades will have a price impact which affect the price at which the asset is…
We assume that an individual invests in a financial market with one riskless and one risky asset, with the latter's price following a diffusion with stochastic volatility. In the current financial market especially, it is important to…
We consider a model where an agent has a repeated decision to make and wishes to maximize their total payoff. Payoffs are influenced by an action taken by the agent, but also an unknown state of the world that evolves over time. Before…
We consider a continuous-time market with proportional transaction costs. Under appropriate assumptions we prove the existence of optimal strategies for investors who maximize their worst-case utility over a class of possible models. We…
We study the problem of asset liquidation in financial systems. During financial crises, asset liquidation is often inevitable but can lead to substantial losses if a significant amount of illiquid assets are sold simultaneously at…
In this paper we propose a dynamic model of Limit Order Book (LOB). The main feature of our model is that the shape of the LOB is determined endogenously by an expected utility function via a competitive equilibrium argument. Assuming zero…
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 the problem of the optimal execution of a large trade in the presence of nonlinear transient impact. We propose an approach based on homotopy analysis, whereby a well behaved initial strategy is continuously deformed to lower the…
We propose a microstructural modeling framework for studying optimal market making policies in a FIFO (first in first out) limit order book (LOB). In this context, the limit orders, market orders, and cancel orders arrivals in the LOB are…
Market making is a fundamental trading problem in which an agent provides liquidity by continually offering to buy and sell a security. The problem is challenging due to inventory risk, the risk of accumulating an unfavourable position and…