Related papers: Macroscopic Market Making
We propose a microstructural modeling framework for studying optimal market making policies in a FIFO (first in first out) limit order book (LOB). In this context, the limit orders, market orders, and cancel orders arrivals in the LOB are…
In this paper we explore optimal liquidation in a market populated by a number of heterogeneous market makers that have limited inventory-carrying and risk-bearing capacity. We derive a reduced form model for the dynamic of their aggregated…
This paper studies the problem of optimally extracting nonrenewable natural resource in light of various financial and economic restrictions and constraints. Taking into account the fact that the market values of the main natural resources…
This paper examines a variety of classical optimization problems, including well-known minimization tasks and more general variational inequalities. We consider a stochastic formulation of these problems, and unlike most previous work, we…
In this paper, we present a discrete-type approximation scheme to solve continuous-time optimal stopping problems based on fully non-Markovian continuous processes adapted to the Brownian motion filtration. The approximations satisfy…
This paper is concerned with a partially observed hybrid optimal control problem, where continuous dynamics and discrete events coexist and in particular, the continuous dynamics can be observed while the discrete events, described by a…
This paper studies a portfolio optimization problem in a discrete-time Markovian model of a financial market, in which asset price dynamics depend on an external process of economic factors. There are transaction costs with a structure that…
This paper studies the equilibrium pricing of asset shares in the presence of dynamic private information. The market consists of a risk-neutral informed agent who observes the firm value, noise traders, and competitive market makers who…
This paper considers a Markovian model of a limit order book where time-dependent rates are allowed. With the objective of understanding the mechanisms through which a microscopic model of an orderbook can converge to more general diffusion…
We use a white noise approach to study the problem of optimal inside control of a stochastic delay equation driven by a Brownian motion B and a Poisson random measure N. In particular, we use Hida-Malliavin calculus and the Donsker delta…
This work considers a stochastic model in which the uncertainty is driven by a multidimensional Brownian motion. The market price of risk process makes the transition between real world probability measure and risk neutral probability…
We consider a simple model for the evolution of a limit order book in which limit orders of unit size arrive according to independent Poisson processes. The frequencies of buy limit orders below a given price level, respectively sell limit…
Stochastic optimization is a vital field in the realm of mathematical optimization, finding applications in diverse areas ranging from operations research to machine learning. In this paper, we introduce a novel first-order optimization…
Many processes, such as discrete event systems in engineering or population dynamics in biology, evolve in discrete space and continuous time. We consider the problem of optimal decision making in such discrete state and action space…
Through the analysis of a dataset of ultra high frequency order book updates, we introduce a model which accommodates the empirical properties of the full order book together with the stylized facts of lower frequency financial data. To do…
We study the problem of the optimal execution of a large trade in the presence of nonlinear transient impact. We propose an approach based on homotopy analysis, whereby a well behaved initial strategy is continuously deformed to lower the…
The master equation and, more generally, Markov processes are routinely used as models for stochastic processes. They are often justified on the basis of randomization and coarse-graining assumptions. Here instead, we derive n-th order…
We investigate the portfolio execution problem under a framework in which volatility and liquidity are both uncertain. In our model, we assume that a multidimensional Markovian stochastic factor drives both of them. Moreover, we model…
We present a Markovian market model driven by a hidden Brownian efficient price. In particular, we extend the queue-reactive model, making its dynamics dependent on the efficient price. Our study focuses on two sub-models: a signal-driven…
We propose a formulation of the stochastic cutting stock problem as a discounted infinite-horizon Markov decision process. At each decision epoch, given current inventory of items, an agent chooses in which patterns to cut objects in stock…