Related papers: Multi-asset optimal trade execution with stochasti…
In a fixed time horizon, appropriately executing a large amount of a particular asset -- meaning a considerable portion of the volume traded within this frame -- is challenging. Especially for illiquid or even highly liquid but also highly…
This paper is concerned with a kind of linear-quadratic (LQ) optimal control problem of backward stochastic differential equation (BSDE) with partial information. The cost functional includes cross terms between the state and control, and…
We study a multi-dimensional optimal execution problem in illiquid markets with both instantaneous and persistent price impact and stochastic resilience. In our model the value function can be described by a multi-dimensional backward…
This paper is concerned with a stochastic linear-quadratic optimal control problem in a finite time horizon, where the coefficients of the control system are allowed to be random, and the weighting matrices in the cost functional are…
The subject of this paper is an optimal consumption/optimal portfolio problem with transaction costs and with multiple risky assets. In our model the transaction costs take a special form in that transaction costs on purchases of one of the…
This paper is concerned with the maximum principle of stochastic optimal control problems, where the coefficients of the state equation and the cost functional are uncertain, and the system is generally under Markovian regime switching.…
This paper is concerned with a backward stochastic linear-quadratic (LQ, for short) optimal control problem with deterministic coefficients. The weighting matrices are allowed to be indefinite, and cross-product terms in the control and…
Empirical studies indicate the presence of multi-scales in the volatility of underlying assets: a fast-scale on the order of days and a slow-scale on the order of months. In our previous works, we have studied the portfolio optimization…
Trading a financial instrument pushes its price and those of other assets, a phenomenon known as cross-impact. To be of use, cross-impact models must fit data and be well-behaved so they can be applied in applications such as optimal…
In this paper, we propose a unified stochastic optimal control framework that integrates time-optimal control problems with classical stochastic optimal control formulations. Unlike conventional deterministic time-optimal control models,…
An investor trades a safe and several risky assets with linear price impact to maximize expected utility from terminal wealth. In the limit for small impact costs, we explicitly determine the optimal policy and welfare, in a general…
This paper studies an optimal trading problem that incorporates the trader's market view on the terminal asset price distribution and uninformative noise embedded in the asset price dynamics. We model the underlying asset price evolution by…
We consider an illiquid financial market with different regimes modeled by a continuous-time finite-state Markov chain. The investor can trade a stock only at the discrete arrival times of a Cox process with intensity depending on the…
Focusing on gains & losses relative to a risk-free benchmark instead of terminal wealth, we consider an asset allocation problem to maximize time-consistently a mean-risk reward function with a general risk measure which is i)…
We revisit optimal execution of an active portfolio in the presence of slippage (aka linear, proportional, or absolute-value) costs. Market efficiency implies a close balance between active alphas and trading costs, so even small changes to…
Stochastic optimal control problems have a long tradition in applied probability, with the questions addressed being of high relevance in a multitude of fields. Even though theoretical solutions are well understood in many scenarios, their…
An optimal ergodic control problem (EC problem, for short) is investigated for a linear stochastic differential equation with quadratic cost functional. Constant nonhomogeneous terms, not all zero, appear in the state equation, which lead…
In a continuous-time model with multiple assets described by c\`{a}dl\`{a}g processes, this paper characterizes superhedging prices, absence of arbitrage, and utility maximizing strategies, under general frictions that make execution prices…
We analyze an optimal trade execution problem in a financial market with stochastic liquidity. To this end we set up a limit order book model in continuous time. Both order book depth and resilience are allowed to evolve randomly in time.…
We study the problem of dynamically trading futures in a regime-switching market. Modeling the underlying asset price as a Markov-modulated diffusion process, we present a utility maximization approach to determine the optimal futures…