Related papers: Optimal execution and speculation with trade signa…
We consider a broker who has to place a large order which consumes a sizable part of average daily trading volume. The broker's aim is thus to minimize execution costs he incurs from the adverse impact of his trades on market prices. By…
Optimal trading is a recent field of research which was initiated by Almgren, Chriss, Bertsimas and Lo in the late 90's. Its main application is slicing large trading orders, in the interest of minimizing trading costs and potential…
This paper addresses the optimal scheduling of the liquidation of a portfolio using a new angle. Instead of focusing only on the scheduling aspect like Almgren and Chriss, or only on the liquidity-consuming orders like Obizhaeva and Wang,…
When prices reflect all available information, they oscillate around an equilibrium level. This oscillation is the result of the temporary market impact caused by waves of buyers and sellers. This price behavior can be approximated through…
We study the market impact of a meta-order in the framework of the Minority Game. This amounts to studying the response of the market when introducing a trader who buys or sells a fixed amount h for a finite time T. This perturbation…
In this paper, we study a time-inconsistent stochastic optimal control problem with a recursive cost functional by a multi-person hierarchical differential game approach. An equilibrium strategy of this problem is constructed and a…
We study an optimal execution problem in illiquid markets with both instantaneous and persistent price impact and stochastic resilience when only absolutely continuous trading strategies are admissible. In our model the value function can…
We study the problem of utility maximization from terminal wealth in which an agent optimally builds her portfolio by investing in a bond and a risky asset. The asset price dynamics follow a diffusion process with regime-switching…
We study the optimal liquidation problem in a market model where the bid price follows a geometric pure jump process whose local characteristics are driven by an unobservable finite-state Markov chain and by the liquidation rate. This model…
In the over-the-counter market in derivatives, we sometimes see large numbers of traders taking the same position and risk. When there is this kind of concentration in the market, the position impacts the pricings of all other derivatives…
In this paper, we introduce a novel reinforcement learning framework for optimal trade execution in a limit order book. We formulate the trade execution problem as a dynamic allocation task whose objective is the optimal placement of market…
We study the optimal Market Making problem in a Limit Order Book (LOB) market simulated using a high-fidelity, mutually exciting Hawkes process. Departing from traditional Brownian-driven mid-price models, our setup captures key…
The efficient market hypothesis (EMH) famously stated that prices fully reflect the information available to traders. This critically depends on the transfer of information into prices through trading strategies. Traders optimise their…
This study explores the design of an efficient rebate policy in auction markets, focusing on a continuous-time setting with competition among market participants. In this model, a stock exchange collects transaction fees from auction…
We develop a comprehensive mathematical and computational framework for optimal production planning in economies governed by stochastic regime switches driven by a continuous-time Markov chain. The value functions of the underlying…
This study investigates the prevention of market manipulation using a price-impact model of financial market trading as a linear system. First, I define a trading game between speculators such that they implement a manipulation trading…
In this paper we study a continuous time equilibrium model of limit order book (LOB) in which the liquidity dynamics follows a non-local, reflected mean-field stochastic differential equation (SDE) with evolving intensity. Generalizing the…
A new approach to obtaining market--directional information, based on a non-stationary solution to the dynamic equation "future price tends to the value that maximizes the number of shares traded per unit time" [1] is presented. In our…
We consider a spread financial market defined by the multidimensional Ornstein--Uhlenbeck (OU) process. We study the optimal consumption/investment problem for logarithmic utility functions in the base of stochastic dynamical programming…
Most of the existing literature on optimal trade execution in limit order book models assumes that resilience is positive. But negative resilience also has a natural interpretation, as it models self-exciting behaviour of the price impact,…