Related papers: Insider Trading with Penalties
Posted price mechanisms (PPM) constitute one of the predominant practices to price goods in online marketplaces and their revenue guarantees have been a central object of study in the last decade. We consider a basic setting where the…
This paper examines the role of algorithmic trading in modern financial markets. Additionally, order types, characteristics, and special features of algorithmic trading are described under the lens provided by the large development of high…
We study the power of price discrimination via an intermediary in bilateral trade, when there is a revenue-maximizing seller selling an item to a buyer with a private value drawn from a prior. Between the seller and the buyer, there is an…
We consider a model in which a trader aims to maximize expected risk-adjusted profit while trading a single security. In our model, each price change is a linear combination of observed factors, impact resulting from the trader's current…
We present tight bounds and heuristics for personalized, multi-product pricing problems. Under mild conditions we show that the best price in the direction of a positive vector results in profits that are guaranteed to be at least as large…
In this paper, we introduce a novel reinforcement learning framework for optimal trade execution in a limit order book. We formulate the trade execution problem as a dynamic allocation task whose objective is the optimal placement of market…
Sequential auctions for identical items with unit-demand, private-value buyers are common and often occur periodically without end, as new bidders replace departing ones. We model bidder uncertainty by introducing a probability that a…
We consider the problem of dynamic buying and selling of shares from a collection of $N$ stocks with random price fluctuations. To limit investment risk, we place an upper bound on the total number of shares kept at any time. Assuming that…
This paper develops a mathematical framework for building a position in a stock over a fixed period of time while in competition with one or more other traders doing the same thing. We develop a game-theoretic framework that takes place in…
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 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 studies learning in markets with aggregate uncertainty about whether trade is efficient. A long-lived seller offers prices to buyers, who are short-lived and arrive according to a Poisson process. A hidden state determines…
We model a delivery platform facilitating transactions among three sides: buyers, stores, and couriers. In addition to buyers paying store-specific purchase prices and couriers receiving store--buyer-specific delivery compensation from the…
Optimal control models for limit order trading often assume that the underlying asset price is a Brownian motion since they deal with relatively short time scales. The resulting optimal bid and ask limit order prices tend to track the…
We study the design of optimal incentives in sequential processes. To do so, we consider a basic and fundamental model in which an agent initiates a value-creating sequential process through costly investment with random success. If…
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…
Evolutions of the trading landscape lead to the capability to exchange the same financial instrument on different venues. Because of liquidity issues, the trading firms split large orders across several trading destinations to optimize…
This paper studies optimal market making for large-tick assets in the presence of latency. We consider a random walk model for the asset price, and formulate the market maker's optimization problem using Markov Decision Processes (MDP). We…
This paper studies the optimal investment problem with random endowment in an inventory-based price impact model with competitive market makers. Our goal is to analyze how price impact affects optimal policies, as well as both pricing rules…
In this article we develop a general theory of exact parametric penalty functions for constrained optimization problems. The main advantage of the method of parametric penalty functions is the fact that a parametric penalty function can be…