Related papers: Optimal Turnover, Liquidity, and Autocorrelation
We consider a simplified model for optimizing a single-asset portfolio in the presence of transaction costs given a signal with a certain autocorrelation and cross-correlation structure. In our setup, the portfolio manager is given two…
In this paper, we introduce a linear stochastic volatility model driven by $\alpha$-stable processes, which admits a unique positive solution. To preserve positivity, we modify the classical forward Euler-Maruyama scheme and analyze its…
An exact solution for a high speed deterministic traffic model with open boundaries and synchronous update rule is presented. Because of the strong correlations in the model, the qualitative structure of the stationary state can be…
We design an optimal strategy for investment in a portfolio of assets subject to a multiplicative Brownian motion. The strategy provides the maximal typical long-term growth rate of investor's capital. We determine the optimal fraction of…
This paper first describes a class of uncertain stochastic control systems with Markovian switching, and derives an It\^o-Liu formula for Markov-modulated processes. And we characterize an optimal control law, which satisfies the…
We present a simulation-and-regression method for solving dynamic portfolio allocation problems in the presence of general transaction costs, liquidity costs and market impacts. This method extends the classical least squares Monte Carlo…
We consider an investor who seeks to maximize her expected utility derived from her terminal wealth relative to the maximum performance achieved over a fixed time horizon, and under a portfolio drawdown constraint, in a market with local…
Motivated by the industry practice of pairs trading, we study the optimal timing strategies for trading a mean-reverting price spread. An optimal double stopping problem is formulated to analyze the timing to start and subsequently…
This paper studies the portfolio optimization problem when the investor's utility is general and the return and volatility of the risky asset are fast mean-reverting, which are important to capture the fast-time scale in the modeling of…
We calculate explicitly the optimal strategy for an investor with exponential utility function when the stock price follows an autoregressive Gaussian process. We also calculate its performance and analyse it when the trading horizon tends…
Stochastic resetting breaks detailed balance and drives the formation of nonequilibrium steady states . Here, we consider a chain of diffusive processes $x_i(t)$ that interact unilaterally: at random time intervals, the process $x_n$…
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…
This paper presents a data-driven interpretable machine learning algorithm for semi-static hedging of Exchange Traded options, considering transaction costs with efficient run-time. Further, we provide empirical evidence on the performance…
Trailing stop is a popular stop-loss trading strategy by which the investor will sell the asset once its price experiences a pre-specified percentage drawdown. In this paper, we study the problem of timing buy and then sell an asset subject…
Optimal B-robust estimate is constructed for multidimensional parameter in drift coefficient of diffusion type process with small noise. Optimal mean-variance robust (optimal V -robust) trading strategy is find to hedge in mean-variance…
We introduce a stochastic model that describes the quasi-static dynamics of an electric transmission network under perturbations introduced by random load fluctuations, random removing of system components from service, random repair times…
This paper deals a continuous-time state-dependent jump linear system, a particular kind of stochastic switching system. In particular, we consider a situation when the transition rate of the random jump process depends on the state…
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 test whether simple, interpretable state variables-trend and momentum-can generate durable out-of-sample alpha in one of the world's most liquid assets, gold. Using a rolling 10-year training and 6-month testing walk-forward from 2015 to…
In this paper we develop a statistical arbitrage trading strategy with two key elements in hi-frequency trading: stop-loss and leverage. We consider, as in Bertram (2009), a mean-reverting process for the security price with proportional…