Related papers: Profit Maximization In Arbitrage Loops
We study a utility maximization problem in a financial market with a stochastic drift process, combining a worst-case approach with filtering techniques. Drift processes are difficult to estimate from asset prices, and at the same time…
When people choose routes minimizing their individual delay, the aggregate congestion can be much higher compared to that experienced by a centrally-imposed routing. Yet centralized routing is incompatible with the presence of…
Randomized mechanisms, which map a set of bids to a probability distribution over outcomes rather than a single outcome, are an important but ill-understood area of computational mechanism design. We investigate the role of randomized…
In a combinatorial exchange setting, players place sell (resp. buy) bids on combinations of traded goods. Besides the question of finding an optimal selection of winning bids, the question of how to share the obtained profit is of high…
We consider the impact of trading fees on the profits of arbitrageurs trading against an automated market maker (AMM) or, equivalently, on the adverse selection incurred by liquidity providers (LPs) due to arbitrage. We extend the model of…
Nonconvexities in markets with discrete decisions and nonlinear constraints make efficient pricing challenging, often necessitating subsidies. A prime example is the unit commitment (UC) problem in electricity markets, where costly…
Classical optimal auction theory assumes that bids reach the seller directly. We study how this picture changes when a revenue-maximizing intermediary controls access to the seller's auction. Motivated by blockchain auctions, online…
Optimal execution of a portfolio have been a challenging problem for institutional investors. Traders face the trade-off between average trading price and uncertainty, and traditional methods suffer from the curse of dimensionality. Here,…
We develop an algorithmic framework for solving convex optimization problems using no-regret game dynamics. By converting the problem of minimizing a convex function into an auxiliary problem of solving a min-max game in a sequential…
We consider the hedging problem where a futures position can be automatically liquidated by the exchange without notice. We derive a semi-closed form for an optimal hedging strategy with dual objectives - to minimise both the variance of…
Mean-variance portfolio optimization problems often involve separable nonconvex terms, including penalties on capital gains, integer share constraints, and minimum position and trade sizes. We propose a heuristic algorithm for such problems…
The sparse portfolio selection problem is one of the most famous and frequently-studied problems in the optimization and financial economics literatures. In a universe of risky assets, the goal is to construct a portfolio with maximal…
We consider the problem of a single seller repeatedly selling a single item to a single buyer (specifically, the buyer has a value drawn fresh from known distribution $D$ in every round). Prior work assumes that the buyer is fully rational…
We construct and study market models admitting optimal arbitrage. We say that a model admits optimal arbitrage if it is possible, in a zero-interest rate setting, starting with an initial wealth of 1 and using only positive portfolios, to…
We study policy optimization in an infinite horizon, $\gamma$-discounted constrained Markov decision process (CMDP). Our objective is to return a policy that achieves large expected reward with a small constraint violation. We consider the…
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,…
Multi-round competitions often double or triple the points awarded in the final round, calling it a bonus, to maximize spectators' excitement. In a two-player competition with $n$ rounds, we aim to derive the optimal bonus size to maximize…
This paper introduces a novel methodology for the pricing and management of share buyback contracts, overcoming the limitations of traditional optimal control methods, which frequently encounter difficulties with high-dimensional state…
This paper studies the utility maximization on the terminal wealth with random endowments and proportional transaction costs. To deal with unbounded random payoffs from some illiquid claims, we propose to work with the acceptable portfolios…
We present the first in-depth empirical characterization of the costs of trading on a decentralized exchange (DEX). Using quoted prices from the Uniswap Labs interface for two pools -- USDC-ETH (5bps) and PEPE-ETH (30bps) -- we evaluate the…