Related papers: The Cost of Misspecifying Price Impact

The tendency to overestimate immediate utility is a common cognitive bias. As a result people behave inconsistently over time and fail to reach long-term goals. Behavioral economics tries to help affected individuals by implementing…

The aim of this article is to propose a core game theory model of transaction costs wherein it is indicated how direct costs determine the probability of loss and subsequent transaction costs. The existence of optimum is proven, and the way…

Changes in input distribution can induce shifts in the average predictions of machine learning models. Such prediction shifts may impact downstream business outcomes (e.g. a bank's loan approval rate), so understanding their causes can be…

We study the pricing and hedging of European spread options on correlated assets when, in contrast to the standard framework and consistent with imperfect liquidity markets, the trading in the stock market has a direct impact on stocks…

We consider the weakly supervised binary classification problem where the labels are randomly flipped with probability $1- {\alpha}$. Although there exist numerous algorithms for this problem, it remains theoretically unexplored how the…

Trading a financial instrument pushes its price and those of other assets, a phenomenon known as cross-impact. To be of use, cross-impact models must fit data and be well-behaved so they can be applied in applications such as optimal…

Identical products being sold at different prices in different locations is a common phenomenon. Price differences might occur due to various reasons such as shipping costs, trade restrictions and price discrimination. To model such…

We study a single risky financial asset model subject to price impact and transaction cost over an infinite horizon. An investor needs to execute a long position in the asset affecting the price of the asset and possibly incurring in fixed…

This article presents a generic model for pricing financial derivatives subject to counterparty credit risk. Both unilateral and bilateral types of credit risks are considered. Our study shows that credit risk should be modeled as American…

Firms that price perishable resources -- airline seats, hotel rooms, seasonal inventory -- now routinely use demand predictions, but these predictions vary widely in quality. Under hard capacity constraints, acting on an inaccurate…

Trading a financial asset pushes its price as well as the prices of other assets, a phenomenon known as cross-impact. We consider a general class of kernel-based cross-impact models and investigate suitable parameterisations for trading…

We propose a general approximation method for determining optimal trading strategies in markets with proportional transaction costs, with a polynomial approximation of the residual value function. The method is exemplified by several…

Defect prediction can be a powerful tool to guide the use of quality assurance resources. However, while lots of research covered methods for defect prediction as well as methodological aspects of defect prediction research, the actual cost…

Because of the theoretical challenges posed by the Efficient Market Hypothesis to technical analysis, the effectiveness of technical indicators in high-frequency trading remains inadequately explored, particularly at the minute-level…

In the present work we develop a formalism to tackle the problem of optimal execution when trading market securities. More precisely, we introduce a utility function that balances market impact and timing risk, with this last being modelled…

In this short note, we will show how to optimize the portfolio of a large trader whose hedging strategy affects the price of his assets.

The introduction of transaction costs into the theory of option pricing could lead not only to the change of return for options, but also to the change of the volatility. On the base of assumption of the portfolio analysis, a new equation…

Trading a financial asset pushes its price as well as the prices of other assets, a phenomenon known as cross-impact. The empirical estimation of this effect on complex financial instruments, such as derivatives, is an open problem. To…

Under interference, the treatment of one unit may affect the outcomes of other units. Such interference patterns between units are typically represented by a network. Correctly specifying this network requires identifying which units can…

Kusuoka [ Limit Theorem on Option Replication Cost with Transaction Costs, Ann. Appl. Probab. 5, 198--221, (1995).] showed how to obtain non-trivial scaling limits of superreplication prices in discrete-time models of a single risky asset…