Related papers: Almost Perfect Shadow Prices
In the seminal paper on optimal execution of portfolio transactions, Almgren and Chriss (2001) define the optimal trading strategy to liquidate a fixed volume of a single security under price uncertainty. Yet there exist situations, such as…
This paper studies a class of network games with linear-quadratic payoffs and externalities exerted through a strictly concave interaction function. This class of game is motivated by the diminishing marginal effects with peer influences.…
This paper studies four trading algorithms of a professional trader at a multilateral trading facility, observing a realistic two-sided limit order book whose dynamics are driven by the order book events. The identity of the trader can be…
Traditional auction theory posits that bid value exhibits a positive correlation with the probability of securing the auctioned object in ascending auctions. However, under uncertainty and incomplete information, as is characteristic in…
The aim of this short note is to establish a limit theorem for the optimal trading strategies in the setup of the utility maximization problem with proportional transaction costs. This limit theorem resolves the open question from [4]. The…
Risk-neutral pricing dictates that the discounted derivative price is a martingale in a measure equivalent to the economic measure. The residual ambiguity for incomplete markets is here resolved by minimising the entropy of the price…
We study sequential procurement auctions where the sellers are provided with a ``best and final offer'' (BAFO) strategy. This strategy allows each seller $i$ to effectively ``freeze'' their price while remaining active in the auction, and…
The classical optimal trading problem is the closure of a position in an asset over a time interval; the trader maximizes an expected utility under the constraint that the position be fully closed by terminal time. Since the asset price is…
We compare the profit of the optimal third-degree price discrimination policy against a uniform pricing policy. A uniform pricing policy offers the same price to all segments of the market. Our main result establishes that for a broad class…
We consider a discrete time financial market with proportional transaction costs under model uncertainty, and study a num\'eraire-based semi-static utility maximization problem with an exponential utility preference. The randomization…
We investigate online pricing in two-sided markets where a platform repeatedly posts prices based on binary accept/reject feedback to maximize gains-from-trade (GFT) or profit. We characterize the regret achievable across three mechanism…
We study the arbitrage opportunities in the presence of transaction costs in a sequence of binary markets approximating the fractional Black-Scholes model. This approximating sequence was constructed by Sottinen and named fractional binary…
Congestion pricing has received lots of attention in scientific discussion. Congestion pricing means that the operator increases prices at the time of congestion and the traffic demand are expected to decrease. In a certain sense, shadow…
We provide closed-form market equilibrium formula consolidating informational imperfections and investors beliefs. Based on Merton's model, we characterize the equilibrium expected excess returns vector with incomplete information. We then…
We study reserve prices in auctions with independent private values when bidders are expectations-based loss averse. We find that the optimal public reserve price excludes fewer bidder types than under risk neutrality. Moreover, we show…
Recently a new algorithm for sampling posteriors of unnormalised probability densities, called ABC Shadow, was proposed in [8]. This talk introduces a global optimisation procedure based on the ABC Shadow simulation dynamics. First the…
Spoofing is an illegal act of artificially modifying the supply to drive temporarily prices in a given direction for profit. In practice, detection of such an act is challenging due to the complexity of modern electronic platforms and the…
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 paper presents an optimal allocation problem in a financial market with one risk-free and one risky asset, when the market is driven by a stochastic market price of risk. We solve the problem in continuous time, for an investor with a…
The paper considers trading with proportional transaction costs. We give a necessary and sufficient condition for A, the cone of claims attainable from zero endowment, to be closed, and show, in general, how to represent its closure in such…