Related papers: Optimal Execution with Quadratic Variation Invento…
We carry out a large-scale empirical data analysis to examine the efficiency of the so-called pairs trading. On the basis of relevant three thresholds, namely, starting, profit-taking, and stop-loss for the `first-passage process' of the…
We investigate a class of optimal stopping problems arising in, for example, studies considering the timing of an irreversible investment when the underlying follows a skew Brownian motion. Our results indicate that the local directional…
In this paper, we propose a minimal model beyond geometric Brownian motion that aims to describe price actions with market inefficiency. From simple financial theory considerations, we arrive at a simple two-variable hidden Markovian time…
We develop a behavioral model for liquidity and volatility based on empirical regularities in trading order flow in the London Stock Exchange. This can be viewed as a very simple agent based model in which all components of the model are…
Statistical inference for stochastic processes based on high-frequency observations has been an active research area for more than two decades. One of the most well-known and widely studied problems has been the estimation of the quadratic…
Motivated by the literature on investment flows and optimal trading, we examine intraday predictability in the cross-section of stock returns. We find a striking pattern of return continuation at half-hour intervals that are exact multiples…
In this paper we formulate and study an optimal switching problem under partial information. In our model the agent/manager/investor attempts to maximize the expected reward by switching between different states/investments. However, he is…
The paper studies a class of quadratic optimal control problems for partially observable linear dynamical systems. In contrast to the full information case, the control is required to be adapted to the filtration generated by the…
Traders are often faced with large block orders in markets with limited liquidity and varying volatility. Executing the entire order at once usually incurs a large trading cost because of this limited liquidity. In order to minimize this…
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…
The analysis of high-frequency financial data is often impeded by the presence of noise. This article is motivated by intraday return data in which market microstructure noise appears to be rough, that is, best captured by a continuous-time…
We propose a simple model for the behaviour of longterm investors on a stock market, consisting of three particles, which represent the current price of the stock and the opinion of the buyers, respectively sellers, about the right trading…
Executing a basket of co-integrated assets is an important task facing investors. Here, we show how to do this accounting for the informational advantage gained from assets within and outside the basket, as well as for the permanent price…
Empirical evidence suggests that even the most competitive markets are not strictly efficient. Price histories can be used to predict near future returns with a probability better than random chance. Many markets can be considered as {\it…
We investigate activities that have different periods of duration. We define the profit intensity as a measure of this economic category. The profit intensity in a repeated trading has a unique property of attaining its maximum at a fixed…
This paper considers the linear-quadratic dual control problem where the system parameters need to be identified and the control objective needs to be optimized in the meantime. Contrary to existing works on data-driven linear-quadratic…
We consider the problem of evaluating the quality of startup companies. This can be quite challenging due to the rarity of successful startup companies and the complexity of factors which impact such success. In this work we collect data on…
We consider the problem of tracking a target whose dynamics is modeled by a continuous It\=o semi-martingale. The aim is to minimize both deviation from the target and tracking efforts. We establish the existence of asymptotic lower bounds…
We present an empirical study of the subordination hypothesis for a stochastic time series of a stock price. The fluctuating rate of trading is identified with the stochastic variance of the stock price, as in the continuous-time random…
We construct a Bayesian sequential test of two simple hypotheses about the value of the unobservable drift coefficient of a Brownian motion, with a possibility to change the initial decision at subsequent moments of time for some penalty.…