Related papers: Optimal Turnover, Liquidity, and Autocorrelation
This work introduces a new framework for modeling financial markets through an interpretable probabilistic state machine. By clustering historical returns based on momentum and risk features across multiple time horizons, we identify…
We consider a variant of the classical linear quadratic Gaussian regulator (LQG) in which penalties on the endpoint state are replaced by the specification of the terminal state distribution. The resulting theory considerably differs from…
We consider a liquidation problem in which a risk-averse trader tries to liquidate a fixed quantity of an asset in the presence of market impact and random price fluctuations. The trader encounters a trade-off between the transaction costs…
In life-cycle economics the Samuelson paradigm (Samuelson, 1969) states that the optimal investment is in constant proportions out of lifetime wealth composed of current savings and the present value of future income. It is well known that…
In principle, the generalized master equation can be used to efficiently compute the macroscopic first passage time (FPT) distribution of a complex stochastic system from short-term microscopic simulation data. However, computing its…
The total duration of drawdowns is shown to provide a moment-free, unbiased, efficient and robust estimator of Sharpe ratios both for Gaussian and heavy-tailed price returns. We then use this quantity to infer an analytic expression of the…
Bayesian optimization is proposed for automatic learning of optimal controller parameters from experimental data. A probabilistic description (a Gaussian process) is used to model the unknown function from controller parameters to a…
We consider a velocity tracking problem for stochastic Navier-Stokes equations in a 2D-bounded domain. The control acts on the boundary through an injection-suction device with uncertainty, which acts in accordance with the non-homogeneous…
The intricate behavior patterns of financial markets are influenced by fundamental, technical, and psychological factors. During times of high volatility and regime shifts causes many traditional strategies like trend-following or…
Working on different aspects of algorithmic trading we empirically discovered a new market invariant. It links together the volatility of the instrument with its traded volume, the average spread and the volume in the order book. The…
We study continuous-time portfolio choice with nonlinear payoffs under smooth ambiguity and Bayesian learning. We develop a general framework for dynamic, non-concave asset allocation that accommodates nonlinear payoffs, broad utility…
We consider hedging of a contingent claim by a 'semi-static' strategy composed of a dynamic position in one asset and static (buy-and-hold) positions in other assets. We give general representations of the optimal strategy and the hedging…
This work addresses the optimal covariance control problem for stochastic discrete-time linear time-varying systems subject to chance constraints. Covariance steering is a stochastic control problem to steer the system state Gaussian…
We study the limit of the joint distribution of a multidimensional Generalized Tempered Stable (GTS) process and its quadratic covariation process when the stable index tends to two. Under a proper scaling, the GTS processes converges to a…
In this paper, we study the diffusion approximation for singularly perturbed stochastic reaction-diffusion equation with a fast oscillating term. The asymptotic limit for the original system is obtained, where an extra Gaussian term…
In most real scenarios the construction of a risk-neutral portfolio must be performed in discrete time and with transaction costs. Two human imposed constraints are the risk-aversion and the profit maximization, which together define a…
Statistical inference for time series such as curve estimation for time-varying models or testing for existence of change-point have garnered significant attention. However, these works are generally restricted to the assumption of…
We consider an investor, whose portfolio consists of a single risky asset and a risk free asset, who wants to maximize his expected utility of the portfolio subject to managing the Value at Risk (VaR) assuming a heavy tailed distribution of…
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…
We develop a class of non-life reserving models using a stable-1/2 random bridge to simulate the accumulation of paid claims, allowing for an essentially arbitrary choice of a priori distribution for the ultimate loss. Taking an…