Related papers: Optimal Execution under Incomplete Information
Management of the portfolios containing low liquidity assets is a tedious problem. The buyer proposes the price that can differ greatly from the paper value estimated by the seller, the seller, on the other hand, can not liquidate his…
We analyze a continuous-time optimal trade execution problem in multiple assets where the price impact and the resilience can be matrix-valued stochastic processes that incorporate cross-impact effects. In addition, we allow for stochastic…
This paper deals with the optimal stopping problem under partial observation for piecewise-deterministic Markov processes. We first obtain a recursive formulation of the optimal filter process and derive the dynamic programming equation of…
We study the problem of optimal trading using general alpha predictors with linear costs and temporary impact. We do this within the framework of stochastic optimization with finite horizon using both limit and market orders. Consistently…
A fundamental economic question is that of designing revenue-maximizing mechanisms in dynamic environments. This paper considers a simple yet compelling market model to tackle this question, where forward-looking buyers arrive at the market…
We consider optimal execution strategies for block market orders placed in a limit order book (LOB). We build on the resilience model proposed by Obizhaeva and Wang (2005) but allow for a general shape of the LOB defined via a given density…
Management of a portfolio that includes an illiquid asset is an important problem of modern mathematical finance. One of the ways to model illiquidity among others is to build an optimization problem and assume that one of the assets in a…
Market participants regularly send bid and ask quotes to exchange-operated limit order books. This creates an optimization challenge where their potential profit is determined by their quoted price and how often their orders are…
We propose a general approximation method for determining optimal trading strategies in markets with proportional transaction costs, with a polynomial approximation of the residual value function. The method is exemplified by several…
Liquidation is the process of selling a large number of shares of one stock sequentially within a given time frame, taking into consideration the costs arising from market impact and a trader's risk aversion. The main challenge in…
We study a an optimal high frequency trading problem within a market microstructure model designed to be a good compromise between accuracy and tractability. The stock price is driven by a Markov Renewal Process (MRP), while market orders…
In this paper we study a continuous time stochastic inventory model for a commodity traded in the spot market and whose supply purchase is affected by price and demand uncertainty. A firm aims at meeting a random demand of the commodity at…
We propose a static equilibrium model for limit order book where profit-maximizing investors receive an information signal regarding the liquidation value of the asset and execute via a competitive dealer with random initial inventory, who…
We consider the hedging error of a derivative due to discrete trading in the presence of a drift in the dynamics of the underlying asset. We suppose that the trader wishes to find rebalancing times for the hedging portfolio which enable him…
A first attempt at obtaining market--directional information from a non--stationary solution of the dynamic equation "future price tends to the value that maximizes the number of shares traded per unit time" [1] is presented. We demonstrate…
We model the trading activity between a broker and her clients (informed and uninformed traders) as an infinite-horizon stochastic control problem. We derive the broker's optimal dealing strategy in closed form and use this to introduce an…
This paper studies the fill probabilities of limit orders placed at different price levels in a limit order book. These probabilities play a central role in execution optimization, as limit orders are not guaranteed to be executed and…
The classical optimal investment and consumption problem with infinite horizon is studied in the presence of transaction costs. Both proportional and fixed costs as well as general utility functions are considered. Weak dynamic programming…
In this paper, we consider the optimal portfolio liquidation problem under the dynamic mean-variance criterion and derive time-consistent solutions in three important models. We give adapted optimal strategies under a reconsidered…
We characterize profit-maximizing operating strategies, over some time horizon [0,T], for an energy store which is trading in an arbitrage market. Our theory allows for leakage, operating inefficiencies, operating constraints and general…