Related papers: Trading Foreign Exchange Triplets
We study the problem of optimal pricing and hedging of a European option written on an illiquid asset $Z$ using a set of proxies: a liquid asset $S$, and $N$ liquid European options $P_i$, each written on a liquid asset $Y_i, i=1,N$. We…
We consider the problem of option hedging in a market with proportional transaction costs. Since super-replication is very costly in such markets, we replace perfect hedging with an expected loss constraint. Asymptotic analysis for small…
This paper studies an optimal trading problem that incorporates the trader's market view on the terminal asset price distribution and uninformative noise embedded in the asset price dynamics. We model the underlying asset price evolution by…
This work extends a previous work in regime detection, which allowed trading positions to be profitably adjusted when a new regime was detected, to ex ante prediction of regimes, leading to substantial performance improvements over the…
We study optimal buying and selling strategies in target zone models. In these models the price is modeled by a diffusion process which is reflected at one or more barriers. Such models arise for example when a currency exchange rate is…
We analyze structure of the world foreign currency exchange (FX) market viewed as a network of interacting currencies. We analyze daily time series of FX data for a set of 63 currencies, including gold, silver and platinum. We group…
Gold and bitcoin are not new to us, but with limited cash and time, given only the past stream of the daily price of gold and bitcoin, it is a kind of new problem for us to develop a certain model and determine the best strategy to get the…
We propose a Genetic Programming architecture for the generation of foreign exchange trading strategies. The system's principal features are the evolution of free-form strategies which do not rely on any prior models and the utilization of…
This paper presents static and dynamic versions of univariate, multivariate, and multilevel functional time-series methods to forecast implied volatility surfaces in foreign exchange markets. We find that dynamic functional principal…
We present an optimal investment theorem for a currency exchange model with random and possibly discontinuous proportional transaction costs. The investor's preferences are represented by a multivariate utility function, allowing for…
In this paper, we propose a method for evaluating autonomous trading strategies that provides realistic expectations, regarding the strategy's long-term performance. This method addresses This method addresses many pitfalls that currently…
Significant progress has been made in automated problem-solving using societies of agents powered by large language models (LLMs). In finance, efforts have largely focused on single-agent systems handling specific tasks or multi-agent…
We explore the deliberate infusion of ambiguity into the design of contracts. We show that when the agent is ambiguity-averse and hence chooses an action that maximizes their minimum utility, the principal can strictly gain from using an…
Deep hedging (Buehler et al. 2019) is a versatile framework to compute the optimal hedging strategy of derivatives in incomplete markets. However, this optimal strategy is hard to train due to action dependence, that is, the appropriate…
In this study, we propose a fuzzy system for conducting short-term transactions in the forex market. The system is designed to enhance common strategies in the forex market using fuzzy logic, thereby improving the accuracy of transactions.…
We consider the problem of maximizing portfolio value when an agent has a subjective view on asset value which differs from the traded market price. The agent's trades will have a price impact which affect the price at which the asset is…
In financial markets marked by inherent volatility, extreme events can result in substantial investor losses. This paper proposes a portfolio strategy designed to mitigate extremal risks. By applying extreme value theory, we evaluate the…
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…
The integration of Artificial Intelligence (AI) in the financial domain has opened new avenues for quantitative trading, particularly through the use of Large Language Models (LLMs). However, the challenge of effectively synthesizing…
In this work we study the optimal execution problem with multiplicative price impact in algorithm trading, when an agent holds an initial position of shares of a financial asset. The inter-selling-decision times are modelled by the arrival…