Related papers: Optimal order execution under price impact: A hybr…
Market impact is a key concept in the study of financial markets and several models have been proposed in the literature so far. The Transient Impact Model (TIM) posits that the price at high frequency time scales is a linear combination of…
I present an overview of some recent advancements on the empirical analysis and theoretical modeling of the process of price formation in financial markets as the result of the arrival of orders in a limit order book exchange. After…
We solve explicitly a two-dimensional singular control problem of finite fuel type for infinite time horizon. The problem stems from the optimal liquidation of an asset position in a financial market with multiplicative and transient price…
In financial markets, the order flow, defined as the process assuming value one for buy market orders and minus one for sell market orders, displays a very slowly decaying autocorrelation function. Since orders impact prices, reconciling…
We investigate optimal consumption policies in the liquidity risk model introduced in Pham and Tankov (2007). Our main result is to derive smoothness results for the value functions of the portfolio/consumption choice problem. As an…
Execution algorithms are vital to modern trading, they enable market participants to execute large orders while minimising market impact and transaction costs. As these algorithms grow more sophisticated, optimising them becomes…
An agent holds a position in a perpetual contract with payoff function $\psi$ and attempts to liquidate the position while managing transaction costs, inventory risk, and funding rate payments. By solving the agent's stochastic control…
We apply Reinforcement Learning algorithms to solve the classic quantitative finance Market Making problem, in which an agent provides liquidity to the market by placing buy and sell orders while maximizing a utility function. The optimal…
We have studied here the self-organising features of the dynamics of a model market, where the agents `trade' for a single commodity with their money. The model market consists of fixed numbers of economic agents, money supply and…
Battery participants in performance-based frequency regulation markets must consider the cost of battery aging in their operating strategies to maximize market profits. In this paper we solve this problem by proposing an optimal control…
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…
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…
In this article, we develop a modular framework for the application of Reinforcement Learning to the problem of Optimal Trade Execution. The framework is designed with flexibility in mind, in order to ease the implementation of different…
This paper presents a new financial market simulator that may be used as a tool in both industry and academia for research in market microstructure. It allows multiple automated traders and/or researchers to simultaneously connect to an…
Efficient markets are characterised by profit-driven participants continuously refining their positions towards the latest insights. Margins for profit generation are generally small, shaping a difficult landscape for automated trading…
We analyse two models of liquidity provision to determine the retail traders' preference for marketable order routing. Order internalization is captured by a model of market makers competing for the retail order flow in a Bertrand fashion.…
We propose a general framework to describe the impact of different events in the order book, that generalizes previous work on the impact of market orders. Two different modeling routes can be considered, which are equivalent when only…
A fundamental economic question is that of designing revenue-maximizing mechanisms in dynamic environments. This paper considers a simple yet compelling market model to tackle this question, where forward-looking buyers arrive at the market…
We study an optimal execution problem in the infinite horizon setup. Our financial market is given by the Black-Scholes model with a linear price impact. The main novelty of the current note is that we study the constrained case where the…
We propose a stochastic game modelling the strategic interaction between market makers and traders of optimal execution type. For traders, the permanent price impact commonly attributed to them is replaced by quoting strategies implemented…