Related papers: Optimal liquidity-based trading tactics
We devise a scheme for producing, in the least possible time, $n$ identical objects with $p$ agents that work at differing speeds. This involves halting the process in order to transfer production across agent types. For the case of two…
In this work we study a finite horizon optimal liquidation problem with multiplicative price impact in algorithmic trading, using market orders. We analyze the case when an agent is trading on a market with two financial assets, whose…
Trading frictions are stochastic. They are, moreover, in many instances fast-mean reverting. Here, we study how to optimally trade in a market with stochastic price impact and study approximations to the resulting optimal control problem…
We study a problem of an online retailer who observes the unit sales of a product, and dynamically changes the retail price, in order to maximize the expected revenue. Assuming the demand of the product is price sensitive, we are interested…
The aim of this short note is to establish a limit theorem for the optimal trading strategies in the setup of the utility maximization problem with proportional transaction costs. This limit theorem resolves the open question from [4]. The…
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…
We develop a behavioral model for liquidity and volatility based on empirical regularities in trading order flow in the London Stock Exchange. This can be viewed as a very simple agent based model in which all components of the model are…
We consider the problem of designing an expected-revenue maximizing mechanism for allocating multiple non-perishable goods of $k$ varieties to flexible consumers over $T$ time steps. In our model, a random number of goods of each variety…
Motivated by the increasing need to hedge against load and generation uncertainty in the operation of power grids, we propose flexibility maximization during operation. We consider flexibility explicitly as the amount of uncertainty that…
We propose a simple market model where agents trade different types of products with each other by using money, relying only on local information. Value fluctuations of single products, combined with the condition of maximum profit in…
As the FX markets continue to evolve, many institutions have started offering passive access to their internal liquidity pools. Market makers act as principal and have the opportunity to fill those orders as part of their risk management,…
We develop a model of the behaviour of a dynamically optimizing economic agent who makes consumption-saving and spatial relocation decisions. We formulate an existence result for the model, derive the necessary conditions for optimality and…
This paper studies the problem of optimal flow control in dynamic inventory systems. A dynamic optimal distribution problem, including time-varying supply and demand, capacity constraints on the transportation lines, and convex flow cost…
We consider an optimal investment-consumption problem for a utility-maximizing investor who has access to assets with different liquidity and whose consumption rate as well as terminal wealth are subject to lower-bound constraints. Assuming…
We study optimal liquidation of a trading position (so-called block order or meta-order) in a market with a linear temporary price impact (Kyle, 1985). We endogenize the pressure to liquidate by introducing a downward drift in the…
An optimal control problem for the continuity equation is considered. The aim of a controller is to maximize the total mass within a target set at a given type moment. An iterative numerical algorithm for solving this problem is presented.
We consider a hidden-action principal-agent model, in which actions require different amounts of effort, and the agent privately knows his ability that determines his cost of effort. We show that linear contracts admit approximation…
We construct an utility-based dynamic asset pricing model for a limit order market. The price is nonlinear in volume and subject to market impact. We solve an optimal hedging problem under the market impact and derive the dynamics of the…
We build an optimal portfolio liquidation model for OTC markets, aiming at minimizing the trading costs via the choice of the liquidation time. We work in the Locally Linear Order Book framework of \cite{toth2011anomalous} to obtain the…
Following the recent literature on make take fees policies, we consider an exchange wishing to set a suitable contract with several market makers in order to improve trading quality on its platform. To do so, we use a principal-agent…