Related papers: Optimal liquidation under stochastic price impact
Complementing existing results on minimal ruin probabilities, we minimize expected discounted penalty functions (or Gerber-Shiu functions) in a Cramer-Lundberg model by choosing optimal reinsurance. Reinsurance strategies are modelled as…
We consider a class of closed loop stochastic optimal control problems in finite time horizon, in which the cost is an expectation conditional on the event that the process has not exited a given bounded domain. An important difficulty is…
The scope of this paper is to study the optimal stopping problems associated to a stochastic process, which may represent the gain of an investment, for which information on the final value is available a priori. This information may…
We study an optimal investment/consumption problem in a model capturing market and credit risk dependencies. Stochastic factors drive both the default intensity and the volatility of the stocks in the portfolio. We use the martingale…
We consider the numerical solution of Hamilton-Jacobi-Bellman equations arising in stochastic control theory. We introduce a class of monotone approximation schemes relying on monotone interpolation. These schemes converge under very weak…
We study the problem of the execution of a moderate size order in an illiquid market within the framework of a solvable Markovian model. We suppose that in order to avoid impact costs, a trader decides to execute her order through a unique…
This paper examines a trade execution game for two large traders in a generalized price impact model. We incorporate a stochastic and sequentially dependent factor that exogenously affects the market price into financial markets. Our model…
We study a risk-sharing economy where an arbitrary number of heterogenous agents trades an arbitrary number of risky assets subject to quadratic transaction costs. For linear state dynamics, the forward-backward stochastic differential…
In this article we consider an optimization problem of expected utility maximization of continuous-time trading in a financial market. This trading is constrained by a benchmark for a utility-based shortfall risk measure. The market…
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 study OTC bond market making on a size ladder with quadratic inventory penalty and a running target on the dealer's size-weighted hit ratio within a stochastic optimal control approach. We demonstrate that the corresponding reduced…
The practice of valuation by marking-to-market with current trading prices is seriously flawed. Under leverage the problem is particularly dramatic: due to the concave form of market impact, selling always initially causes the expected…
We study an optimal execution problem in illiquid markets with both instantaneous and persistent price impact and stochastic resilience when only absolutely continuous trading strategies are admissible. In our model the value function can…
This study investigates an optimal investment problem for an insurance company operating under the Cramer-Lundberg risk model, where investments are made in both a risky asset and a risk-free asset. In contrast to other literature that…
We consider the optimal dividend problem in the so-called degenerate bivariate risk model under the assumption that the surplus of one branch may become negative. More specific, we solve the stochastic control problem of maximizing…
We propose a heterogeneous agent market model (HAM) in continuous time. The market is populated by fundamental traders and chartists, who both use simple linear trading rules. Most of the related literature explores stability, price…
We present an analytic solution of a differential-difference equation that appears when one solves an optimal stopping time problem with state process following a jump-diffusion process. This equation occurs in the context of real options…
We study a single risky financial asset model subject to price impact and transaction cost over an infinite horizon. An investor needs to execute a long position in the asset affecting the price of the asset and possibly incurring in fixed…
Market makers provide liquidity to other market participants: they propose prices at which they stand ready to buy and sell a wide variety of assets. They face a complex optimization problem with both static and dynamic components. They…
A risk-averse agent hedges her exposure to a non-tradable risk factor $U$ using a correlated traded asset $S$ and accounts for the impact of her trades on both factors. The effect of the agent's trades on $U$ is referred to as cross-impact.…