Related papers: Market Simulation under Adverse Selection
We study optimal execution in markets with transient price impact in a competitive setting with $N$ traders. Motivated by prior negative results on the existence of pure Nash equilibria, we consider randomized strategies for the traders and…
Agricultural commodity futures are often settled by delivery. Quality options that allow the futures short to deliver one of several underlying assets are commonly used in such contracts to prevent manipulation. Inclusion of these options…
Order book imbalance (OBI) - buy orders minus sell orders near the best quote - measures supply-demand imbalance that can move prices. OBI is positively correlated with returns, and some investors try to use it to improve performance. Large…
We address the problem of executing large client orders in continuous double-auction markets under time and liquidity constraints. We propose a model predictive control (MPC) framework that balances three competing objectives: order…
The aim of this work consists in the study of the optimal investment strategy for a behavioural investor, whose preference towards risk is described by both a probability distortion and an S-shaped utility function. Within a continuous-time…
Counterfactual reasoning from logged data has become increasingly important for many applications such as web advertising or healthcare. In this paper, we address the problem of learning stochastic policies with continuous actions from the…
The dynamics of financial markets are driven by the interactions between participants, as well as the trading mechanisms and regulatory frameworks that govern these interactions. Decision-makers would rather not ignore the impact of other…
This paper investigates the optimal choices of financial derivatives to complete a financial market in the framework of stochastic volatility (SV) models. We introduce an efficient and accurate simulation-based method, applicable to…
The paper studies an oligopolistic equilibrium model of financial agents who aim to share their random endowments. The risk-sharing securities and their prices are endogenously determined as the outcome of a strategic game played among all…
We describe an end-to-end real-time S&P futures trading system. Inner-shell stochastic nonlinear dynamic models are developed, and Canonical Momenta Indicators (CMI) are derived from a fitted Lagrangian used by outer-shell trading models…
Leveraged ETFs (L-ETFs) are exchange-traded funds that achieve price movements several times greater than an index by holding index-linked futures such as Nikkei Stock Average Index futures. It is known that when the price of an L-ETF…
In this article, we provide a flexible framework for optimal trading in an asset listed on different venues. We take into account the dependencies between the imbalance and spread of the venues, and allow for partial execution of limit…
The contour maps of the error of historical resp. parametric estimates for large random portfolios optimized under the risk measure Expected Shortfall (ES) are constructed. Similar maps for the sensitivity of the portfolio weights to small…
We present an algorithm producing a dynamic non-self-financing hedging strategy in an incomplete market corresponding to investor-relevant risk criterion. The optimization is a two stage process that first determines admissible model…
With the fast development of quantitative portfolio optimization in financial engineering, lots of AI-based algorithmic trading strategies have demonstrated promising results, among which reinforcement learning begins to manifest…
This paper studies the robust optimal gain selection problem for financial trading systems, formulated within a \emph{double linear policy} framework, which allocates capital across long and short positions. The key objective is to…
In financial markets, liquidity is not constant over time but exhibits strong seasonal patterns. In this article we consider a limit order book model that allows for time-dependent, deterministic depth and resilience of the book and…
This paper examines replication portfolio construction in incomplete markets - a key problem in financial engineering with applications in pricing, hedging, balance sheet management, and energy storage planning. We model this as a…
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…
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…