Related papers: Optimal execution with liquidity risk in a diffusi…
In this paper we investigate a new class of growth rate maximization problems based on impulse control strategies such that the average number of trades per time unit does not exceed a fixed level. Moreover, we include proportional…
We present a method for obtaining approximate solutions to the problem of optimal execution, based on a signature method. The framework is general, only requiring that the price process is a geometric rough path and the price impact…
This paper studies a sequential decision problem where payoff distributions are known and where the riskiness of payoffs matters. Equivalently, it studies sequential choice from a repeated set of independent lotteries. The decision-maker is…
Motivated by the practical challenge in monitoring the performance of a large number of algorithmic trading orders, this paper provides a methodology that leads to automatic discovery of the causes that lie behind a poor trading…
The distribution of liquidity within the limit order book is essential for the impact of market orders on the stock price and the emergence of price shocks. Limit orders are characterized by stylized facts: The number of inserted limit…
We study a continuous-time version of the intermediation model of Grossman and Miller (1988). To wit, we solve for the competitive equilibrium prices at which liquidity takers' demands are absorbed by dealers with quadratic inventory costs,…
This paper discusses the num\'eraire-based utility maximization problem in markets with proportional transaction costs. In particular, the investor is required to liquidate all her position in stock at the terminal time. We first observe…
Automated market makers with concentrated liquidity capabilities are programmable at the tick level. The maximization of earned fees, plus depreciated reserves, is a convex optimization problem whose vector solution gives the best provision…
We revisit optimal execution of an active portfolio in the presence of slippage (aka linear, proportional, or absolute-value) costs. Market efficiency implies a close balance between active alphas and trading costs, so even small changes to…
Small-to-medium size enterprises (SMEs), including many startup firms, need to manage interrelated flows of cash and inventories of goods. In this paper, we model a firm that can finance its inventory (ordered or manufactured) with loans in…
Volume imbalance in a limit order book is often considered as a reliable indicator for predicting future price moves. In this work, we seek to analyse the nuances of the relationship between prices and volume imbalance. To this end, we…
We consider the problem of optimal bidding for virtual trading in two-settlement electricity markets. A virtual trader aims to arbitrage on the differences between day-ahead and real-time market prices; both prices, however, are random and…
We study optimal liquidation in the presence of linear temporary and transient price impact along with taking into account a general price predicting finite-variation signal. We formulate this problem as minimization of a cost-risk…
This paper considers an insurer with two collaborating business lines that faces three critical decisions: (1) dividend payout, (2) reinsurance coverage, and (3) capital injection between the lines, in the presence of model uncertainty. The…
An agent holds a position in a perpetual contract with payoff function $\psi$ and attempts to liquidate the position while managing transaction costs, inventory risk, and funding rate payments. By solving the agent's stochastic control…
Trading frictions are stochastic. They are, moreover, in many instances fast-mean reverting. Here, we study how to optimally trade in a market with stochastic price impact and study approximations to the resulting optimal control problem…
This paper studies the problem of optimal flow control in dynamic inventory systems. A dynamic optimal distribution problem, including time-varying supply and demand, capacity constraints on the transportation lines, and convex flow cost…
In this work, we study the multi-agent decision problem where agents try to coordinate to optimize a given system-level objective. While solving for the global optimal is intractable in many cases, the greedy algorithm is a well-studied and…
We consider a continuous-time market with proportional transaction costs. Under appropriate assumptions we prove the existence of optimal strategies for investors who maximize their worst-case utility over a class of possible models. We…
We introduce a new model in order to describe the fluctuation of tick-by-tick financial time series. Our model, based on marked point process, allows us to incorporate in a unique process the duration of the transaction and the…