Related papers: A central bank strategy for defending a currency p…
Finding Bertram's optimal trading strategy for a pair of cointegrated assets following the Ornstein--Uhlenbeck price difference process can be formulated as an unconstrained convex optimization problem for maximization of expected profit…
We consider the multi-period portfolio optimization problem with a single asset that can be held long or short. Due to the presence of transaction costs, maximizing the immediate reward at each period may prove detrimental, as frequent…
A continuous-time Markowitz's mean-variance portfolio selection problem is studied in a market with one stock, one bond, and proportional transaction costs. This is a singular stochastic control problem,inherently in a finite time horizon.…
We propose a game-theoretic framework to study the outcomes of packetized payments, a cross-ledger transaction protocol, with strategic and possibly malicious agents. We derive the transaction failure rate and demonstrate that without…
This article examines arbitrage investment in a mispriced asset when the mispricing follows the Ornstein-Uhlenbeck process and a credit-constrained investor maximizes a generalization of the Kelly criterion. The optimal differentiable and…
This paper explores the gain maximization problem of two nations engaging in non-cooperative bilateral trade. Probabilistic model of an exchange of commodities under different price systems is considered. Volume of commodities exchanged…
This study investigates the functioning of modern payment systems through the lens of banks' maturity mismatch practices, and it examines the effects of banks' refusal to roll over short-term interbank liabilities on financial stability.…
This paper investigates a two-echelon inventory system with a central warehouse and N (N > 2) retailers managed by a centralized information-sharing mechanism. In particular, the paper mathematically models an easy-to-implement inventory…
This paper takes the development of Central bank digital currencies as a perspective, introduces it into the Baumol-Tobin money demand theoretical framework, establishes the transactional money demand model under Central bank Digital…
In this paper, we construct the utility-based optimal hedging strategy for a European-type option in the Almgren-Chriss model with temporary price impact. The main mathematical challenge of this work stems from the degeneracy of the second…
This work studies the valuation of currency options in markets suffering from a financial crisis. We consider a European option where the underlying asset is a foreign currency. We assume that the value of the underlying asset is a…
We consider the problem of governing systemic risk in an assets-liabilities dynamical model of banking system. In the model considered each bank is represented by its assets and its liabilities.The capital reserves of a bank are the…
Partially convertible economies face a market-design problem: trade integration, cross-border investment, and domestic balance-sheet exposure increase the demand for currency hedging before full financial integration is complete. China…
We develop the optimal trading strategy for a foreign exchange (FX) broker who must liquidate a large position in an illiquid currency pair. To maximize revenues, the broker considers trading in a currency triplet which consists of the…
Motivated by the industry practice of pairs trading, we study the optimal timing strategies for trading a mean-reverting price spread. An optimal double stopping problem is formulated to analyze the timing to start and subsequently…
An Entropic Dynamics of exchange rates is laid down to model the dynamics of foreign exchange rates, FX, and European Options on FX. The main objective is to represent an alternative framework to model dynamics. Entropic inference is an…
Reinforcement learning has been explored for many problems, from video games with deterministic environments to portfolio and operations management in which scenarios are stochastic; however, there have been few attempts to test these…
Optimal execution is an important problem faced by any trader. Most solutions are based on the assumption of constant market impact, while liquidity is known to be dynamic. Moreover, models with time-varying liquidity typically assume that…
We study the ex-ante minimization of market inefficiency, defined in terms of minimum deviation of market prices from fundamental values, from a centralized planner's perspective. Prices are pressured from exogenous trading actions of…
This paper assesses the link between central bank's policy rate, inflation rate and output gap through Taylor rule equation in both United States and United Kingdom from 1990 to 2020. Also, it analyses the relationship between monetary…