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We study the problem of dynamically trading a futures contract and its underlying asset under a stochastic basis model. The basis evolution is modeled by a stopped scaled Brownian bridge to account for non-convergence of the basis at…
We study a problem of finding an optimal stopping strategy to liquidate an asset with unknown drift. Taking a Bayesian approach, we model the initial beliefs of an individual about the drift parameter by allowing an arbitrary probability…
Due to the limited predictability of wind power and other stochastic generation, trading this energy in competitive electricity markets is challenging. This paper derives revenue-maximising and risk-constrained strategies for stochastic…
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…
The purpose of this paper is two-fold: We extend the well-known relation between optimal stopping and randomized stopping of a given stochastic process to a situation where the available information flow is a filtration with no a priori…
In this work we study the optimal execution problem with multiplicative price impact in algorithm trading, when an agent holds an initial position of shares of a financial asset. The inter-selling-decision times are modelled by the arrival…
This paper addresses the problem of steering an initial probability distribution to a target probability distribution through a deterministic or stochastic linear control system. Our proposed approach is inspired by the flow matching…
We consider a pair of traders in a market where the information available to the second trader is a strict subset of the information available to the first trader. The traders make prices based on the information available concerning a…
We formalize the paradox of an omniscient yet lazy investor - a perfectly informed agent who trades infrequently due to execution or computational frictions. Starting from a deterministic geometric construction, we derive a closed-form…
We study the optimal mechanism design problem faced by a market intermediary who makes revenue by connecting buyers and sellers. We first show that the optimal intermediation protocol has substantial structure: it is the solution to an…
This paper shows that Hamiltonians and operators can also be put to good use even in contexts which are not purely physics based. Consider the world of finance. The work presented here {models a two traders system with information exchange…
We consider a multi-agent system in which a decentralized team of agents controls a stochastic system in the presence of an adversary. Instead of committing to a fixed information sharing protocol, the agents can strategically decide at…
This paper constructs optimal brokerage contracts for multiple (heterogeneous) clients trading a single asset whose price follows the Almgren-Chriss model. The distinctive features of this work are as follows: (i) the reservation values of…
This paper considers the problem faced by a bank which trades in the funds market so as to maintain the reserve requirements and minimize the costs of doing that. We work in a stochastic paradigm and the reserve requirements are determined…
We study optimal buying and selling strategies in target zone models. In these models the price is modeled by a diffusion process which is reflected at one or more barriers. Such models arise for example when a currency exchange rate is…
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…
This work initiates research into the problem of determining an optimal investment strategy for investors with different attitudes towards the trade-offs of risk and profit. The probability distribution of the return values of the stocks…
In a one-sided limit order book, satisfying some realistic assumptions, where the unaffected price process follows a Levy process, we consider a market agent that wants to liquidate a large position of shares. We assume that the agent has…
An investor with constant absolute risk aversion trades a risky asset with general It\^o-dynamics, in the presence of small proportional transaction costs. In this setting, we formally derive a leading-order optimal trading policy and the…
Minimizing execution costs for large orders is a fundamental challenge in finance. Firms often depend on brokers to manage their trades due to limited internal resources for optimizing trading strategies. This paper presents a methodology…