Related papers: A central bank strategy for defending a currency p…
Market impact has become a subject of increasing concern among academics and industry experts. We put forward a price impact model which considers the heteroscedasticity of price in the time dimension and dependency between permanent impact…
This paper studies a central planner's decision making on behalf of a group of members with diverse discount rates. In the context of optimal stopping, we work with an aggregation preference to incorporate all discount rates via an attitude…
Market participants regularly send bid and ask quotes to exchange-operated limit order books. This creates an optimization challenge where their potential profit is determined by their quoted price and how often their orders are…
Selecting an appropriate statistical model to forecast exchange rates is still today a relevant issue for policymakers and central bankers. The so-called Meese and Rogoff puzzle assesses that exchange rate fluctuations are unpredictable. In…
In the seminal paper on optimal execution of portfolio transactions, Almgren and Chriss (2001) define the optimal trading strategy to liquidate a fixed volume of a single security under price uncertainty. Yet there exist situations, such as…
In this work, we investigate a biased dollar exchange model with collective debt limit, in which agents picked at random (with a rate depending on the amount of dollars they have) give at random time a dollar to another agent being picked…
We study the implications of a central bank digital currency (CBDC) for the transmission of household preference shocks and for welfare in a New Keynesian framework where the CBDC competes with bank deposits for household resources and…
We examine the impact of mandatory export proceeds repatriation on exchange rate stability in three emerging markets, Iran, Sri Lanka, and Turkey, using the Generalized Synthetic Control framework. By modeling exchange rate stochastic…
Motivated by the emergence of popular service-based two-sided markets where sellers can serve multiple buyers at the same time, we formulate and study the {\em two-sided cost sharing} problem. In two-sided cost sharing, sellers incur…
We propose a useful approach for investigating the statistical properties of foreign currency exchange rates. Our approach is based on queueing theory, particularly, the so-called renewal-reward theorem. For the first passage processes of…
In this paper, we explore the pricing and hedging strategies for an innovative insurance product called the equity protection swap(EPS). Notably, we focus on the application of EPSs involving cross-currency reference portfolios, reflecting…
In the context of understanding the nature of the risk transformation process of the financial system we propose an iterative risk-trading game between several agents who build their trading strategies based on a general utility setting.…
This paper presents an optimal allocation problem in a financial market with one risk-free and one risky asset, when the market is driven by a stochastic market price of risk. We solve the problem in continuous time, for an investor with a…
We propose a generalization of the Bass diffusion model in discrete-time that explicitly models the effect of price in adoption. Our model is different from earlier price-incorporated models and fits well to adoption data for various…
Trading large volumes of a financial asset in order driven markets requires the use of algorithmic execution dividing the volume in many transactions in order to minimize costs due to market impact. A proper design of an optimal execution…
A pair trade is a portfolio consisting of a long position in one asset and a short position in another, and it is a widely applied investment strategy in the financial industry. Recently, Ekstr\"om, Lindberg and Tysk studied the problem of…
We use techniques from network science to study correlations in the foreign exchange (FX) market over the period 1991--2008. We consider an FX market network in which each node represents an exchange rate and each weighted edge represents a…
This article explores the use of machine learning models to build a market generator. The underlying idea is to simulate artificial multi-dimensional financial time series, whose statistical properties are the same as those observed in the…
In this paper, we generalize the Almgren-Chriss's market impact model to a more realistic and flexible framework and employ it to derive and analyze some aspects of optimal liquidation problem in a security market. We illustrate how a…
Market makers continuously set bid and ask quotes for the stocks they have under consideration. Hence they face a complex optimization problem in which their return, based on the bid-ask spread they quote and the frequency at which they…