Related papers: A central bank strategy for defending a currency p…
We consider a multivariate financial market with transaction costs and study the problem of finding the minimal initial capital needed to hedge, without risk, European-type contingent claims. The model is similar to the one considered in…
Stablecoins promise par convertibility, yet issuers must balance immediate liquidity against yield on reserves to keep the peg credible. We study this treasury problem as a continuous-time control task with two instruments: reallocating…
We address the problem of optimal Central Bank intervention in the exchange rate market when interventions create feedback in the rate dynamics. In particular, we extend the work done on optimal impulse control by Cadenillas and Zapatero to…
We investigate the well-posedness in the Hadamard sense and the absence of price manipulation in the optimal execution problem within the Almgren-Chriss framework, where the temporary and permanent impact parameters vary deterministically…
The goal of cryptocurrencies is decentralization. In principle, all currencies have equal status. Unlike traditional stock markets, there is no default currency of denomination (fiat), thus the trading pairs can be set freely. However, it…
For a market impact model, price manipulation and related notions play a role that is similar to the role of arbitrage in a derivatives pricing model. Here, we give a systematic investigation into such regularity issues when orders can be…
Using data from a sample of 28 representatives countries, we propose a classification of currency crises consequences based on the ultrametric analysis of the real exchange rate movements time series, without any further assumption. By…
We examine the problem of dynamic reserving for risk in multiple currencies under a general coherent risk measure. The reserver requires to hedge risk in a time-consistent manner by trading in baskets of currencies. We show that reserving…
We consider the problem of hedging a European contingent claim in a Bachelier model with transient price impact as proposed by Almgren and Chriss. Following the approach of Rogers and Singh and Naujokat and Westray, the hedging problem can…
In illiquid markets, option traders may have an incentive to increase their portfolio value by using their impact on the dynamics of the underlying. We provide a mathematical framework within which to value derivatives under market impact…
We consider the problem of governing systemic risk in a banking system model. The banking system model consists in an initial value problem for a system of stochastic differential equations whose dependent variables are the log-monetary…
The classical optimal trading problem is the closure of a position in an asset over a time interval; the trader maximizes an expected utility under the constraint that the position be fully closed by terminal time. Since the asset price is…
This paper proposes a new one-sided matching market model in which every agent has a cost function that is allowed to take a negative value. Our model aims to capture the situation where some agents can profit by exchanging their obtained…
Which level of inflation should Central Banks be targeting? We investigate this issue in the context of a simplified Agent Based Model of the economy. Depending on the value of the parameters that describe the behaviour of agents (in…
This paper analyzes and explicitly solves a class of long-term average impulse control problems with a specific mean-field interaction. The underlying process is a general one-dimensional diffusion with appropriate boundary behavior. The…
The cross-correlations between the exchange rate fluctuations of 74 currencies over the period 1995-2012 are analyzed in this paper. The eigenvalue distribution of the cross-correlation matrix exhibits a bulk which approximately matches the…
Traders constantly consider the price impact associated with changing their positions. This paper seeks to understand how price impact emerges from the quoting strategies of market makers. To this end, market making is modeled as a dynamic…
I characterize optimal government policy in a sticky-price economy with different types of consumers and endogenous financial constraints in the banking and entrepreneurial sectors. The competitive equilibrium allocation is constrained…
The decentralized international market of currency trading is a prototypical complex system having a highly heterogeneous composition. To understand the hierarchical structure relating the price movement of different currencies in the…
This study investigates the prevention of market manipulation using a price-impact model of financial market trading as a linear system. First, I define a trading game between speculators such that they implement a manipulation trading…