Related papers: Transaction Costs in Execution Trading
An investor trades a safe and several risky assets with linear price impact to maximize expected utility from terminal wealth. In the limit for small impact costs, we explicitly determine the optimal policy and welfare, in a general…
We study an American option pricing problem with liquidity risks and transaction fees. As endogenous transaction costs, liquidity risks of the underlying asset are modeled by a mean-reverting process. Transaction fees are exogenous…
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…
We consider the problem of optimal trading for a power producer in the context of intraday electricity markets. The aim is to minimize the imbalance cost induced by the random residual demand in electricity, i.e. the consumption from the…
In this paper we study utility maximization with proportional transaction costs. Assuming extended weak convergence of the underlying processes we prove the convergence of the corresponding utility maximization problems. Moreover, we…
We analyze the efficiency of markets with friction, particularly power markets. We model the market as a dynamic system with $(d_t;\,t\geq 0)$ the demand process and $(s_t;\,t\geq 0)$ the supply process. Using stochastic differential…
This paper investigates the problem of maximizing expected terminal utility in a (generically incomplete) discrete-time financial market model with finite time horizon. In contrast to the standard setting, a possibly non-concave utility…
In this study, we introduce an explicit trading-volume process into the Almgren-Chriss model, which is a standard model for optimal execution. We propose a penalization method for deriving a verification theorem for an adaptive optimization…
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,…
We consider a one-period Kyle (1985) framework where the insider can be subject to a penalty if she trades. We establish existence and uniqueness of equilibrium for virtually any penalty function when noise is uniform. In equilibrium, the…
In this paper the robust utility maximization problem for a market model based on L\'evy processes is analyzed. The interplay between the form of the utility function and the penalization function required to have a well posed problem is…
In this note, we study the utility maximization problem on the terminal wealth under proportional transaction costs and bounded random endowment. In particular, we restrict ourselves to the num\'eraire-based model and work with utility…
We study an optimal execution problem in illiquid markets with both instantaneous and persistent price impact and stochastic resilience when only absolutely continuous trading strategies are admissible. In our model the value function can…
I present an overview of some recent advancements on the empirical analysis and theoretical modeling of the process of price formation in financial markets as the result of the arrival of orders in a limit order book exchange. After…
The introduction of transaction costs into the theory of option pricing could lead not only to the change of return for options, but also to the change of the volatility. On the base of assumption of the portfolio analysis, a new equation…
We employ perturbation analysis technique to study multi-asset portfolio optimisation with transaction cost. We allow for correlations in risky assets and obtain optimal trading methods for general utility functions. Our analytical results…
Execution algorithms are vital to modern trading, they enable market participants to execute large orders while minimising market impact and transaction costs. As these algorithms grow more sophisticated, optimising them becomes…
We study a multiplicative transient price impact model for an illiquid financial market, where trading causes price impact which is multiplicative in relation to the current price, transient over time with finite rate of resilience, and…
This article studies the problem of utility maximization in an incomplete market under a class of nonlinear expectations and general constraints on trading strategies. Using a $g$-martingale method, we provide an explicit solution to our…
We develop a method using parameterized linear equations to define trading mechanisms in market design models. Our method adeptly addresses challenges arising from factors such as complex endowments or coarse priorities, while offering…