Related papers: Shortermism and excessive risk taking in optimal e…
We run experimental asset markets to investigate the emergence of excess trading and the occurrence of synchronised trading activity leading to crashes in the artificial markets. The market environment favours early investment in the risky…
We propose a pseudo-market solution to resource allocation problems subject to constraints. Our treatment of constraints is general: including bihierarchical constraints due to considerations of diversity in school choice, or scheduling in…
I study the limit of a large random economy, where a set of consumers invests in financial instruments engineered by banks, in order to optimize their future consumption. This exercise shows that, even in the ideal case of perfect…
Traders are often faced with large block orders in markets with limited liquidity and varying volatility. Executing the entire order at once usually incurs a large trading cost because of this limited liquidity. In order to minimize this…
We study an optimal liquidation problem under the ambiguity with respect to price impact parameters. Our main results show that the value function and the optimal trading strategy can be characterized by the solution to a semi-linear PDE…
We develop a mixed control framework that combines absolutely continuous controls with impulse interventions subject to stochastic execution delays. The model extends current impulse control formulations by allowing (i) the controller to…
Stochastic multi-armed bandits solve the Exploration-Exploitation dilemma and ultimately maximize the expected reward. Nonetheless, in many practical problems, maximizing the expected reward is not the most desirable objective. In this…
Portfolio management problems are often divided into two types: active and passive, where the objective is to outperform and track a preselected benchmark, respectively. Here, we formulate and solve a dynamic asset allocation problem that…
This study investigates an optimal investment problem for an insurance company operating under the Cramer-Lundberg risk model, where investments are made in both a risky asset and a risk-free asset. In contrast to other literature that…
This paper examines the role of algorithmic trading in modern financial markets. Additionally, order types, characteristics, and special features of algorithmic trading are described under the lens provided by the large development of high…
This paper considers an optimal impulse control problem of dynamical systems generated by a flow. The performance criteria are total costs over the infinite time horizon. Apart from the main performance to be minimized, there are multiple…
We study a finite horizon optimal contracting problem of a risk-neutral principal and a risk-averse agent who receives a stochastic income stream when the agent is unable to make commitments. The problem involves an infinite number of…
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…
We study the problem of maximising terminal utility for an agent facing model uncertainty, in a frictionless discrete-time market with one safe asset and finitely many risky assets. We show that an optimal investment strategy exists if 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,…
Agents that plan and act in the real world must deal with the fact that time passes as they are planning. When timing is tight, there may be insufficient time to complete the search for a plan before it is time to act. By commencing…
We solve a version of the optimal trade execution problem when the mid asset price follows a displaced diffusion. Optimal strategies in the adapted class under various risk criteria, namely value-at-risk, expected shortfall and a new…
Previous literature shows that prevalent risk measures such as Value at Risk or Expected Shortfall are ineffective to curb excessive risk-taking by a tail-risk-seeking trader with S-shaped utility function in the context of portfolio…
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…
In this work, we consider the optimal portfolio selection problem under hard constraints on trading amounts, transaction costs and different rates for borrowing and lending when the risky asset returns are serially correlated. No…