Related papers: Liquidity Stress Testing using Optimal Portfolio L…
We consider an illiquid financial market where a risk averse investor has to liquidate a portfolio within a finite time horizon [0,T] and can trade continuously at a traditional exchange (the "primary venue") and in a dark pool. At the…
When executing their orders, investors are proposed different strategies by brokers and investment banks. Most orders are executed using VWAP algorithms. Other basic execution strategies include POV (also called PVol) -- for percentage of…
In this paper, we consider the portfolio optimization problem in a financial market under a general utility function. Empirical results suggest that if a significant market fluctuation occurs, invested wealth tends to have a notable change…
We study a problem of finding an optimal stopping strategy to liquidate an asset with unknown drift. Taking a Bayesian approach, we model the initial beliefs of an individual about the drift parameter by allowing an arbitrary probability…
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…
In the present work we develop a formalism to tackle the problem of optimal execution when trading market securities. More precisely, we introduce a utility function that balances market impact and timing risk, with this last being modelled…
This article is part of a comprehensive research project on liquidity risk in asset management, which can be divided into three dimensions. The first dimension covers liability liquidity risk (or funding liquidity) modeling, the second…
We investigate the portfolio execution problem under a framework in which volatility and liquidity are both uncertain. In our model, we assume that a multidimensional Markovian stochastic factor drives both of them. Moreover, we model…
We consider a portfolio optimization problem in a defaultable market with finitely-many economical regimes, where the investor can dynamically allocate her wealth among a defaultable bond, a stock, and a money market account. The market…
We consider an optimal consumption/investment problem to maximize expected utility from consumption. In this market model, the investor is allowed to choose a portfolio which consists of one bond, one liquid risky asset (no transaction…
In this work, we consider the optimal portfolio selection problem under hard constraints on trading amounts, transaction costs and different rates for borrowing and lending when the risky asset returns are serially correlated. No…
In this paper we discuss the optimal liquidation over a finite time horizon until the exit time. The drift and diffusion terms of the asset price are general functions depending on all variables including control and market regime. There is…
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.…
In this paper, we search for optimal portfolio strategies in the presence of various risk measure that are common in financial applications. Particularly, we deal with the static optimization problem with respect to Value at Risk, Expected…
We study the problem of the optimal execution of a large trade in the presence of nonlinear transient impact. We propose an approach based on homotopy analysis, whereby a well behaved initial strategy is continuously deformed to lower the…
This paper introduces a new algorithmic execution model that integrates interbank limit and market orders with internal liquidity generated through market making. Based on the Cartea et al.\cite{cartea2015algorithmic} framework, we…
We study the problem of optimally hedging the price exposure of liquidity positions in constant-product automated market makers (AMMs) when the hedge is funded by collateralized borrowing. A liquidity provider (LP) who borrows tokens to…
We study the optimal liquidation problem in a market model where the bid price follows a geometric pure jump process whose local characteristics are driven by an unobservable finite-state Markov chain and by the liquidation rate. This model…
In this note we consider the maximization of the expected terminal wealth for the setup of quadratic transaction costs. First, we provide a very simple probabilistic solution to the problem. Although the problem was largely studied, as far…
A novel procedure is presented for the objective comparison and evaluation of a bank's decision rules in optimising the timing of loan recovery. This procedure is based on finding a delinquency threshold at which the financial loss of a…