Related papers: An approximate solution for options market-making …
In this paper we consider multidimensional mechanism design problem for selling discrete substitutable items to a group of buyers. Previous work on this problem mostly focus on stochastic description of valuations used by the seller.…
When sales of a product are affected by randomness in demand, retailers can use dynamic pricing strategies to maximise their profits. In this article the pricing problem is formulated as a stochastic optimal control problem, where the…
Targeted marketing policies target different customers with different marketing actions. While most research has focused on training targeting policies without managerial constraints, in practice, many firms face managerial constraints when…
Two general algorithms based on opportunity costs are given for approximating a revenue-maximizing set of bids an auctioneer should accept, in a combinatorial auction in which each bidder offers a price for some subset of the available…
The modelling of financial markets presents a problem which is both theoretically challenging and practically important. The theoretical aspects concern the issue of market efficiency which may even have political implications…
We study the warehouse problem, arising in the area of inventory management and production planning. Here, a merchant wants to decide an optimal trading policy that computes quantities of a single commodity to purchase, store and sell…
We study the problem of optimizing assortment decisions in the presence of product-specific costs when customers choose according to a multinomial logit model. This problem is NP-hard and approximate solutions methods have been proposed in…
In this paper, inspired by the work of Megiddo on the formation of preferences and strategic analysis, we consider an early market model studied in the field of economic theory, in which each trader's utility may be influenced by the…
Equipping approximate dynamic programming (ADP) with inputconstraints has a tremendous significance. This enables ADP to be applied tothe systems with actuator limitations, which is quite common for dynamicalsystems. In a conventional…
Stochastic domains often involve risk-averse decision makers. While recent work has focused on how to model risk in Markov decision processes using risk measures, it has not addressed the problem of solving large risk-averse formulations.…
A central challenge in mechanism design is to develop truthful trade mechanisms that maximize the expected gains-from-trade (GFT) in two-sided markets with strategic agents. As achieving the full GFT is generally impossible, much of the…
Pricing of high-dimensional options is one of the most important problems in Mathematical Finance. The objective of this manuscript is to present an original self-contained treatment of the multidimensional pricing. During the past decades…
Designing a financial market that works well is very important for developing and maintaining an advanced economy, but is not easy because changing detailed rules, even ones that seem trivial, sometimes causes unexpected large impacts and…
Recently, a framework for the approximation of the entire set of $\epsilon$-efficient solutions (denote by $E_\epsilon$) of a multi-objective optimization problem with stochastic search algorithms has been proposed. It was proven that such…
An option market maker incurs funding costs when carrying and hedging inventory. To hedge a net long delta inventory, for example, she pays a fee to borrow stock from the securities lending market. Because of haircuts, she posts additional…
Dual control explicitly addresses the problem of trading off active exploration and exploitation in the optimal control of partially unknown systems. While the problem can be cast in the framework of stochastic dynamic programming, exact…
Auctions are markets with strict regulations governing the information available to traders in the market and the possible actions they can take. Since well designed auctions achieve desirable economic outcomes, they have been widely used…
Continuous time models in the theory of real options give explicit formulas for optimal exercise strategies when options are simple and the price of an underlying asset follows a geometric Brownian motion. This paper suggests a general,…
Exactly solving first-order constraints (i.e., first-order formulas over a certain predefined structure) can be a very hard, or even undecidable problem. In continuous structures like the real numbers it is promising to compute approximate…
A novel high-frequency market-making approach in discrete time is proposed that admits closed-form solutions. By taking advantage of demand functions that are linear in the quoted bid and ask spreads with random coefficients, we model the…