Related papers: Optimal Entry and Exit with Signature in Statistic…
This paper studies the problem of determining the optimal cut-off for pairs trading rules. We consider two correlated assets whose spread is modelled by a mean-reverting process with stochastic volatility, and the optimal pair trading rule…
We study a speculative trading problem within the exploratory reinforcement learning (RL) framework of Wang et al. [2020]. The problem is formulated as a sequential optimal stopping problem over entry and exit times under general utility…
In this article, we develop a general framework to study optimal execution and to price block trades. We prove existence of optimal liquidation strategies and we provide regularity results for optimal strategies under very general…
We study the optimal order placement strategy with the presence of a liquidity cost. In this problem, a stock trader wishes to clear her large inventory by a predetermined time horizon $T$. A trader uses both limit and market orders, and a…
For an infinite-horizon continuous-time optimal stopping problem under non-exponential discounting, we look for an optimal equilibrium, which generates larger values than any other equilibrium does on the entire state space. When the…
We propose a pairs trading model that incorporates a time-varying volatility of the Constant Elasticity of Variance type. Our approach is based on stochastic control techniques; given a fixed time horizon and a portfolio of two…
In the present paper, we study the optimal execution problem under stochastic price recovery based on limit order book dynamics. We model price recovery after execution of a large order by accelerating the arrival of the refilling order,…
The focus of this paper is on identifying the most effective selling strategy for pairs trading of stocks. In pairs trading, a long position is held in one stock while a short position is held in another. The goal is to determine the…
Statistical arbitrage exploits temporal price differences between similar assets. We develop a unifying conceptual framework for statistical arbitrage and a novel data driven solution. First, we construct arbitrage portfolios of similar…
Inspired by Strotz's consistent planning strategy, we formulate the infinite horizon mean-variance stopping problem as a subgame perfect Nash equilibrium in order to determine time consistent strategies with no regret. Equilibria among…
This paper investigates the optimal hedging strategies of an informed broker interacting with multiple traders in a financial market. We develop a theoretical framework in which the broker, possessing exclusive information about the drift…
Opportunities for stochastic arbitrage in an options market arise when it is possible to construct a portfolio of options which provides a positive option premium and which, when combined with a direct investment in the underlying asset,…
Market timing is an investment technique that tries to continuously switch investment into assets forecast to have better returns. What is the likelihood of having a successful market timing strategy? With an emphasis on modeling…
We determine the variance-optimal hedge when the logarithm of the underlying price follows a process with stationary independent increments in discrete or continuous time. Although the general solution to this problem is known as backward…
In this work, we study a dynamic portfolio optimization problem related to pairs trading, which is an investment strategy that matches a long position in one security with a short position in another security with similar characteristics.…
We study hedging and pricing of unattainable contingent claims in a non-Markovian regime-switching financial model. Our financial market consists of a bank account and a risky asset whose dynamics are driven by a Brownian motion and a…
We study an optimal execution problem in the presence of market impact where the security price follows a geometric Ornstein-Uhlenbeck process, which implies the mean-reverting property, and show that the optimal strategy is a mixture of…
We propose a framework to study the optimal liquidation strategy in a limit order book for large-tick stocks, with spread equal to one tick. All order book events (market orders, limit orders and cancellations) occur according to…
In a market with a rough or Markovian mean-reverting stochastic volatility there is no perfect hedge. Here it is shown how various delta-type hedging strategies perform and can be evaluated in such markets in the case of European options. A…
We propose a strategy for automated trading, outline theoretical justification of the profitability of this strategy and overview the hypothetical results in application to currency pairs trading. The proposed methodology relies on the…