Related papers: A closed-form solution for optimal mean-reverting …
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 propose a framework for studying optimal market making policies in a limit order book (LOB). The bid-ask spread of the LOB is modelled by a Markov chain with finite values, multiple of the tick size, and subordinated by the Poisson…
We study an optimal execution strategy for purchasing a large block of shares over a fixed time horizon. The execution problem is subject to a general price impact that gradually dissipates due to market resilience. We allow for general…
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 trading in an Almgren-Chriss model with running and terminal inventory costs and general predictive signals about price changes. As a special case, this allows to treat optimal liquidation in "target zone models": asset…
We study a linear price impact model including other liquidity takers, whose flow of orders either follows a Poisson or a Hawkes process. The optimal execution problem is solved explicitly in this context, and the closed-formula optimal…
We consider De Finetti's control problem for absolutely continuous strategies with control rates bounded by a concave function and prove that a generalized mean-reverting strategy is optimal. In order to solve this problem, we need to deal…
A one-factor asset pricing model with an Ornstein--Uhlenbeck process as its state variable is studied under partial information: the mean-reverting level and the mean-reverting speed parameters are modeled as hidden/unobservable stochastic…
We study the optimal order placement strategy with the presence of a liquidity cost. In this problem, a stock trader wishes to clear her large inventory by a predetermined time horizon $T$. A trader uses both limit and market orders, and a…
In this paper, we investigate trading strategies based on exponential moving averages (ExpMAs) of an underlying risky asset. We study both logarithmic utility maximization and long-term growth rate maximization problems and find closed-form…
In speculative markets, risk-free profit opportunities are eliminated by traders exploiting them. Markets are therefore often described as "informationally efficient", rapidly removing predictable price changes, and leaving only residual…
We consider the pricing of energy spread options for spot prices following an exponential Ornstein-Uhlenbeck process driven by a sum of independent multivariate variance gamma processes, which gives rise to mean-reverting, infinite activity…
Consider a trade market with one seller and multiple buyers. The seller aims to sell an indivisible item and maximize their revenue. This paper focuses on a simple and popular mechanism--the fixed-price mechanism. Unlike the standard…
Building on ideas from online convex optimization, we propose a general framework for the design of efficient securities markets over very large outcome spaces. The challenge here is computational. In a complete market, in which one…
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.…
The objective of this paper is to introduce the theory of option pricing for markets with informed traders within the framework of dynamic asset pricing theory. We introduce new models for option pricing for informed traders in complete…
Motivated by continuous-time optimal inventory management, we study a class of stationary mean-field control problems with singular controls. The dynamics are modeled by a mean-reverting Ornstein-Uhlenbeck process, and the performance…
In this paper, we employ the Heston stochastic volatility model to describe the stock's volatility and apply the model to derive and analyze the optimal trading strategies for dealers in a security market. We also extend our study to option…
We deal with the optimal execution problem when the broker's goal is to reach a performance barrier avoiding a downside barrier. The performance is provided by the wealth accumulated by trading in the market, the shares detained by the…