Related papers: Almost Perfect Shadow Prices
There has been substantial recent concern that pricing algorithms might learn to ``collude.'' Supra-competitive prices can emerge as a Nash equilibrium of repeated pricing games, in which sellers play strategies which threaten to punish…
Traders in a market typically have widely different, private information on the return of an asset. The equilibrium price of the asset may reflect this information more accurately if the number of traders is large enough compared to the…
We study the performance of anonymous posted-price selling mechanisms for a standard Bayesian auction setting, where $n$ bidders have i.i.d. valuations for a single item. We show that for the natural class of Monotone Hazard Rate (MHR)…
As markets have digitized, the number of tradable products has skyrocketed. Algorithmically constructed portfolios of these assets now dominate public and private markets, resulting in a combinatorial explosion of tradable assets. In this…
We study optimal trade execution strategies in financial markets with discrete order flow. The agent has a finite liquidation horizon and must minimize price impact given a random number of incoming trade counterparties. Assuming that the…
This paper presents a simple method for a posteriori (historical) multi-variate multi-stage optimal trading under transaction costs and a diversification constraint. Starting from a given amount of money in some currency, we analyze the…
A prevalent market structure in the Internet economy consists of buyers and sellers connected by a platform (such as Amazon or eBay) that acts as an intermediary and keeps a share of the revenue of each transaction. While the optimal…
In a recent publication, using a simple two-period model, which is already capable to capture essential non-convex multiperiod bids, Richstein et al. have shown that in the case of optimal bidding, multi-part bidding always ensures a higher…
We construct algorithms for computation of prices and superhedging strategies for game options in general discrete markets both from the seller and the buyer points of view.
We consider an exchange who wishes to set suitable make-take fees to attract liquidity on its platform. Using a principal-agent approach, we are able to describe in quasi-explicit form the optimal contract to propose to a market maker. This…
Flaws of a continuous limit order book mechanism raise the question of whether a continuous trading session and a periodic auction session would bring better efficiency. This paper wants to go further in designing a periodic auction when…
Optimal execution, i.e., the determination of the most cost-effective way to trade volumes in continuous trading sessions, has been a topic of interest in the equity trading world for years. Electricity intraday trading slowly follows this…
We study a single risky financial asset model subject to price impact and transaction cost over an infinite horizon. An investor needs to execute a long position in the asset affecting the price of the asset and possibly incurring in fixed…
In this article we present a new approach to the numerical valuation of derivative securities. The method is based on our previous work where we formulated the theory of pricing in terms of tradables. The basic idea is to fit a finite…
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,…
A mean-reverting financial instrument is optimally traded by buying it when it is sufficiently below the estimated `mean level' and selling it when it is above. In the presence of linear transaction costs, a large amount of value is paid…
A monopoly platform sells either a risky product (with unknown utility) or a safe product (with known utility) to agents who sequentially arrive and learn the utility of the risky product by the reporting of previous agents. It is costly…
We introduce a Path Shadowing Monte-Carlo method, which provides prediction of future paths, given any generative model. At any given date, it averages future quantities over generated price paths whose past history matches, or `shadows',…
Optimal execution of portfolio transactions is the essential part of algorithmic trading. In this paper we present in simple analytical form the optimal trajectory for risk-averse trader with the assumption of exponential market recovery…
In this paper, we study optimal switching problems under ambiguity. To characterize the optimal switching under ambiguity in the finite horizon, we use multidimensional reflected backward stochastic differential equations (multidimensional…