Related papers: Optimal Signal-Adaptive Trading with Temporary and…
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…
Alpha signals for statistical arbitrage strategies are often driven by latent factors. This paper analyses how to optimally trade with latent factors that cause prices to jump and diffuse. Moreover, we account for the effect of the trader's…
Finding Bertram's optimal trading strategy for a pair of cointegrated assets following the Ornstein--Uhlenbeck price difference process can be formulated as an unconstrained convex optimization problem for maximization of expected profit…
A new method for stochastic control based on neural networks and using randomisation of discrete random variables is proposed and applied to optimal stopping time problems. The method models directly the policy and does not need the…
We study the high-frequency limit of an $n$-trader optimal execution game in discrete time. Traders face transient price impact of Obizhaeva--Wang type in addition to quadratic instantaneous trading costs $\theta(\Delta X_t)^2$ on each…
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…
Efficient markets are characterised by profit-driven participants continuously refining their positions towards the latest insights. Margins for profit generation are generally small, shaping a difficult landscape for automated trading…
We investigate propagation of convexity and convex ordering on a typical discrete-time stochastic optimal control problem, namely the pricing of swing option. The dynamics of the underlying asset is modelled by the Euler scheme of a…
The steady-state turnover of a trading strategy is of clear interest to practitioners and portfolio managers, as is the steady-state Sharpe ratio. In this article, we show that in a convenient Gaussian process model, the steady-state…
Optimal trading strategies for pairs trading have been studied by models that try to find either optimal shares of stocks by assuming no transaction costs or optimal timing of trading fixed numbers of shares of stocks with transaction…
We present a numerical method for computing optimal transition pathways and transition rates in systems of stochastic differential equations (SDEs). In particular, we compute the most probable transition path of stochastic equations by…
We introduce a novel signature approach for pricing and hedging path-dependent options with instantaneous and permanent market impact under a mean-quadratic variation criterion. Leveraging the expressive power of signatures, we recast an…
We consider the determination of the optimal stationary singular stochastic control of a linear diffusion for a class of average cumulative cost minimization problems arising in various financial and economic applications of stochastic…
Prediction markets rely on liquidity to convert trades into informative prices, yet existing mechanisms fix liquidity ex ante. This restriction enforces a static trade-off between price responsiveness and worst-case loss despite inherently…
We study the problem of dynamically trading futures in a regime-switching market. Modeling the underlying asset price as a Markov-modulated diffusion process, we present a utility maximization approach to determine the optimal futures…
Motivated by optimal execution with stochastic signals, market impact and constraints in financial markets, and optimal storage management in commodity markets, we formulate and solve an optimal trading problem with a general propagator…
In this paper, we investigate an optimal control problem with terminal stochastic linear complementarity constraints (SLCC), and its discrete approximation using the relaxation, the sample average approximation (SAA) and the implicit Euler…
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…
We study an optimal control problem on infinite time horizon with semimartingale strategies, random coefficients and regime switching. The value function and the optimal strategy can be characterized in terms of three systems of backward…
In the present paper, we study the optimal execution problem under stochastic price recovery based on limit order book dynamics. We model price recovery after execution of a large order by accelerating the arrival of the refilling order,…