Related papers: Approximately optimal trade execution strategies u…
This paper studies a continuous-time market where an agent, having specified an investment horizon and a targeted terminal mean return, seeks to minimize the variance of the return. The optimal portfolio of such a problem is called…
We revisit optimal execution of an active portfolio in the presence of slippage (aka linear, proportional, or absolute-value) costs. Market efficiency implies a close balance between active alphas and trading costs, so even small changes to…
This paper studies a robust portfolio optimization problem under the multi-factor volatility model introduced by Christoffersen et al. (2009). The optimal strategy is derived analytically under the worst-case scenario with or without…
We study a notion of good-deal hedging, that corresponds to good-deal valuation for generalized good-deal constraints. Under model uncertainty about the market prices of risk of hedging assets, a robust approach leads to a reduction or even…
We consider a hidden-action principal-agent model, in which actions require different amounts of effort, and the agent privately knows his ability that determines his cost of effort. We show that linear contracts admit approximation…
With the increasing integration of power plants into the frequency-regulation markets, the importance of optimal trading has grown substantially. This paper conducts an in-depth analysis of their optimal trading behavior in sequential…
In this research, we develop a trading strategy for the discrete-time optimal liquidation problem of large order trading with different market microstructures in an illiquid market. In this framework, the flow of orders can be viewed as a…
How should one construct a portfolio from multiple mean-reverting assets? Should one add an asset to portfolio even if the asset has zero mean reversion? We consider a position management problem for an agent trading multiple mean-reverting…
Maximum likelihood estimation applied to high-frequency data allows us to quantify intermittency in the fluctu- ations of asset prices. From time records as short as one month these methods permit extraction of a meaningful intermittency…
We investigate the well-posedness in the Hadamard sense and the absence of price manipulation in the optimal execution problem within the Almgren-Chriss framework, where the temporary and permanent impact parameters vary deterministically…
We propose a framework for studying optimal market making policies in a limit order book (LOB). The bid-ask spread of the LOB is modelled by a Markov chain with finite values, multiple of the tick size, and subordinated by the Poisson…
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…
Optimal control models for limit order trading often assume that the underlying asset price is a Brownian motion since they deal with relatively short time scales. The resulting optimal bid and ask limit order prices tend to track the…
This study investigates the optimal strategy for a firm operating in a dynamic Keynesian market setting. The firm's objective function is optimized using the percent deviations from the symmetric equilibrium of both its own price and the…
In speculative markets, risk-free profit opportunities are eliminated by traders exploiting them. Markets are therefore often described as "informationally efficient", rapidly removing predictable price changes, and leaving only residual…
Robust optimization provides a principled framework for decision-making under uncertainty, with broad applications in finance, engineering, and operations research. In portfolio optimization, uncertainty in expected returns and covariances…
The paper studies sub and super-replication price bounds for contingent claims defined on general trajectory based market models. No prior probabilistic or topological assumptions are placed on the trajectory space, trading is assumed to…
We consider the problem of dynamic buying and selling of shares from a collection of $N$ stocks with random price fluctuations. To limit investment risk, we place an upper bound on the total number of shares kept at any time. Assuming that…
The classical discrete time model of proportional transaction costs relies on the assumption that a feasible portfolio process has solvent increments at each step. We extend this setting in two directions, allowing for convex transaction…
A novel high-frequency market-making approach in discrete time is proposed that admits closed-form solutions. By taking advantage of demand functions that are linear in the quoted bid and ask spreads with random coefficients, we model the…