Related papers: Optimal Execution with Quadratic Variation Invento…
In this paper we derive the optimal execution trajectory for a trader who wishes to buy or sell a large position of shares which evolve as a geometric Brownian process in contrast to the arithmetic model which prevails in the existing…
Minimizing execution costs for large orders is a fundamental challenge in finance. Firms often depend on brokers to manage their trades due to limited internal resources for optimizing trading strategies. This paper presents a methodology…
We study the problem of optimal inside control of a stochastic Volterra equation driven by a Brownian motion and a Poisson random measure. We prove a sufficient and a necessary maximum principle for the optimal control when the trader has…
For a semi-martingale $X_t$, which forms a stochastic boundary, a rate-optimal estimator for its quadratic variation $\langle X, X \rangle_t$ is constructed based on observations in the vicinity of $X_t$. The problem is embedded in a…
Optimal trade execution is an important problem faced by essentially all traders. Much research into optimal execution uses stringent model assumptions and applies continuous time stochastic control to solve them. Here, we instead take a…
Optimal execution of portfolio transactions is the essential part of algorithmic trading. In this paper we present in simple analytical form the optimal trajectory for risk-averse trader with the assumption of exponential market recovery…
This paper studies an optimal trading problem that incorporates the trader's market view on the terminal asset price distribution and uninformative noise embedded in the asset price dynamics. We model the underlying asset price evolution by…
Optimal execution, i.e., the determination of the most cost-effective way to trade volumes in continuous trading sessions, has been a topic of interest in the equity trading world for years. Electricity intraday trading slowly follows this…
While absence of arbitrage in frictionless financial markets requires price processes to be semimartingales, non-semimartingales can be used to model prices in an arbitrage-free way, if proportional transaction costs are taken into account.…
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…
Statistical analysis of financial data most focused on testing the validity of Brownian motion (Bm). Analysis performed on several time series have shown deviation from the Bm hypothesis, that is at the base of the evaluation of many…
Considering the paradigmatic driven Brownian motion, we perform extensive numerical analysis on the performance of optimal linear-response processes far from equilibrium. We focus on the overdamped regime where exact optimal processes are…
We consider an investor who is dynamically informed about the future evolution of one of the independent Brownian motions driving a stock's price fluctuations. With linear temporary price impact the resulting optimal investment problem with…
We define a generalized index of jump activity, propose estimators of that index for a discretely sampled process and derive the estimators' properties. These estimators are applicable despite the presence of Brownian volatility in the…
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…
This paper considers the problem of testing for the presence of a continuous part in a semimartingale sampled at high frequency. We provide two tests, one where the null hypothesis is that a continuous component is present, the other where…
It is believed by the majority today that the efficient market hypothesis is imperfect because of market irrationality. Using the physical concepts and mathematical structures of quantum mechanics, we construct an econophysics framework for…
Fractional Brownian motion is a non-Markovian Gaussian process $X_t$, indexed by the Hurst exponent $H$. It generalises standard Brownian motion (corresponding to $H=1/2$). We study the probability distribution of the maximum $m$ of the…
This paper investigates the impact of anonymous trading on the agents' strategy in an optimal execution framework. It mainly explores the specificity of order attribution on the Toronto Stock Exchange, where brokers can choose to either…
We study the problem of optimally managing an inventory with unknown demand trend. Our formulation leads to a stochastic control problem under partial observation, in which a Brownian motion with non-observable drift can be singularly…