Related papers: Trading Cointegrated Assets with Price Impact
We model the impact costs of a strategy that trades a basket of correlated instruments, by extending to the multivariate case the linear propagator model previously used for single instruments. Our specification allows us to calibrate a…
In this paper we explore optimal liquidation in a market populated by a number of heterogeneous market makers that have limited inventory-carrying and risk-bearing capacity. We derive a reduced form model for the dynamic of their aggregated…
We assume a continuous-time price impact model similar to Almgren-Chriss but with the added assumption that the price impact parameters are stochastic processes modeled as correlated scalar Markov diffusions. In this setting, we develop…
We study an optimal liquidation problem with multiplicative price impact in which the trend of the asset's price is an unobservable Bernoulli random variable. The investor aims at selling over an infinite time-horizon a fixed amount of…
Trading large volumes of a financial asset in order driven markets requires the use of algorithmic execution dividing the volume in many transactions in order to minimize costs due to market impact. A proper design of an optimal execution…
We examine optimal execution models that take into account both market microstructure impact and informational costs. Informational footprint is related to order flow and is represented by the trader's influence on the flow imbalance…
We study optimal liquidation strategies under partial information for a single asset within a finite time horizon. We propose a model tailored for high-frequency trading, capturing price formation driven solely by order flow through…
Optimal execution of a portfolio have been a challenging problem for institutional investors. Traders face the trade-off between average trading price and uncertainty, and traditional methods suffer from the curse of dimensionality. Here,…
Equity basket correlation can be estimated both using the physical measure from stock prices, and also using the risk neutral measure from option prices. The difference between the two estimates motivates a so-called "dispersion strategy''.…
We present an experimental and simulated model of a multi-agent stock market driven by a double auction order matching mechanism. Studying the effect of cumulative information on the performance of traders, we find a non monotonic…
We analyze a continuous-time optimal trade execution problem in multiple assets where the price impact and the resilience can be matrix-valued stochastic processes that incorporate cross-impact effects. In addition, we allow for stochastic…
Order book imbalance (OBI) - buy orders minus sell orders near the best quote - measures supply-demand imbalance that can move prices. OBI is positively correlated with returns, and some investors try to use it to improve performance. Large…
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…
This paper investigates the impact of anonymous trading on the agents' strategy in an optimal execution framework. It mainly explores the specificity of order attribution on the Toronto Stock Exchange, where brokers can choose to either…
We consider a financial market in which traders potentially face restrictions in trading some of the available securities. Traders are heterogeneous with respect to their beliefs and risk profiles, and the market is assumed thin: traders…
We study the optimal portfolio liquidation problem over a finite horizon in a limit order book with bid-ask spread and temporary market price impact penalizing speedy execution trades. We use a continuous-time modeling framework, but in…
We study an optimal execution problem in a continuous-time market model that considers market impact. We formulate the problem as a stochastic control problem and investigate properties of the corresponding value function. We find that…
In this article, we analyse optimal statistical arbitrage strategies from stochastic control and optimisation problems for multiple co-integrated stocks with eigenportfolios being factors. Optimal portfolio weights are found by solving a…
We consider the problem of optimal investment in a market with two cointegrated stocks and an agent with CRRA utility. We extend the findings of Liu and Timmermann [The Review of Financial Studies, 26(4):1048-1086, 2013] by paying special…
We consider a class of generalized capital asset pricing models in continuous time with a finite number of agents and tradable securities. The securities may not be sufficient to span all sources of uncertainty. If the agents have…