Related papers: Equilibrium under TWAP trading with quadratic tran…
We show that the problem of existence of equilibrium in Kyle's continuous time insider trading model can be tackled by considering a forward-backward system coupled via an optimal transport type constraint at maturity. The forward component…
We investigate the optimal strategy over a finite time horizon for a portfolio of stock and bond and a derivative in an multiplicative Markovian market model with transaction costs (friction). The optimization problem is solved by a…
This paper is concerned with a time-inconsistent recursive stochastic control problems where the forward state process is constrained through an additional recursive utility system. By adapting the Ekeland variational principle, necessary…
We provide a stochastic analysis of an overlapping-generations model under incomplete markets. By casting individual optimisation with idiosyncratic income risk into a forward-backward stochastic differential equation (FBSDE) system, we (i)…
This paper is concerned with a general linear quadratic (LQ) control problem of mean-field backward stochastic differential equation (BSDE). Here, the weighting matrices in the cost functional are allowed to be indefinite. Necessary and…
We study the expected utility maximization problem of a large investor who is allowed to make transactions on tradable assets in an incomplete financial market with endogenous permanent market impacts. The asset prices are assumed to follow…
The paper is concerned with optimal control of backward stochastic differential equation (BSDE) driven by Teugel's martingales and an independent multi-dimensional Brownian motion, where Teugel's martingales are a family of pairwise…
We study the problem of option pricing and hedging strategies within the frame-work of risk-return arguments. An economic agent is described by a utility function that depends on profit (an expected value) and risk (a variance). In the…
We develop a finite horizon continuous time market model, where risk averse investors maximize utility from terminal wealth by dynamically investing in a risk-free money market account, a stock written on a default-free dividend process,…
A standing assumption in the literature on proportional transaction costs is efficient friction. Together with robust no free lunch with vanishing risk, it rules out strategies of infinite variation, as they usually appear in frictionless…
In this work we study a finite horizon optimal liquidation problem with multiplicative price impact in algorithmic trading, using market orders. We analyze the case when an agent is trading on a market with two financial assets, whose…
The goal of this work is to study binary market models with transaction costs, and to characterize their arbitrage opportunities. It has been already shown that the absence of arbitrage is related to the existence of \lambda-consistent…
We prove a version of the fundamental theorem of asset pricing (FTAP) in continuous time that is based on the strict no-arbitrage condition and that is applicable to both frictionless markets and markets with proportional transaction costs.…
We present FairTraDEX, a decentralized exchange (DEX) protocol based on frequent batch auctions (FBAs), which provides formal game-theoretic guarantees against extractable value. FBAs when run by a trusted third-party provide unique…
We investigate how and when to diversify capital over assets, i.e., the portfolio selection problem, from a signal processing perspective. To this end, we first construct portfolios that achieve the optimal expected growth in i.i.d.…
This paper presents a stochastic model for discrete-time trading in financial markets where trading costs are given by convex cost functions and portfolios are constrained by convex sets. The model does not assume the existence of a cash…
We introduce the quadratic balanced optimization problem (QBOP) which can be used to model equitable distribution of resources with pairwise interaction. QBOP is strongly NP-hard even if the family of feasible solutions has a very simple…
We study linear-quadratic stochastic optimal control problems with bilinear state dependence for which the underlying stochastic differential equation (SDE) consists of slow and fast degrees of freedom. We show that, in the same way in…
In a market with one safe and one risky asset, an investor with a long horizon, constant investment opportunities, and constant relative risk aversion trades with small proportional transaction costs. We derive explicit formulas for the…
We propose a model for hedging in a market with jumps for a large investor. The dynamics of the stock prices and the value process is governed by forward-backward SDEs driven by Teugels martingales. Unlike known FBSDE market models, ours…