Related papers: Optimal Execution under Liquidity Uncertainty
In this paper, we study a time-inconsistent stochastic optimal control problem with a recursive cost functional by a multi-person hierarchical differential game approach. An equilibrium strategy of this problem is constructed and a…
We consider an investor that trades continuously and wants to liquidate an initial asset position within a prescribed time interval. During the execution of the liquidation order the investor is subject to execution risk. We study the…
We study the problem of optimal portfolio selection in an illiquid market with discrete order flow. In this market, bids and offers are not available at any time but trading occurs more frequently near a terminal horizon. The investor can…
We give a complete solution to the problem of minimizing the expected liquidity costs in presence of a general drift when the underlying market impact model has linear transient price impact with exponential resilience. It turns out that…
A price-maker company extracts an exhaustible commodity from a reservoir, and sells it instantaneously in the spot market. In absence of any actions of the company, the commodity's spot price evolves either as a drifted Brownian motion or…
In this paper, we solve the multiple product price optimization problem under interval uncertainties of the price sensitivity parameters in the demand function. The objective of the price optimization problem is to maximize the overall…
We build an optimal portfolio liquidation model for OTC markets, aiming at minimizing the trading costs via the choice of the liquidation time. We work in the Locally Linear Order Book framework of \cite{toth2011anomalous} to obtain the…
We propose a macroscopic market making model \`a la Avellaneda-Stoikov, using continuous processes for orders instead of discrete point processes. The model intends to bridge the gap between market making and optimal execution problems,…
In an equity market model with "Knightian" uncertainty regarding the relative risk and covariance structure of its assets, we characterize in several ways the highest return relative to the market that can be achieved using nonanticipative…
Latency (i.e., time delay) in electronic markets affects the efficacy of liquidity taking strategies. During the time liquidity takers process information and send marketable limit orders (MLOs) to the exchange, the limit order book (LOB)…
Optimal execution in financial markets refers to the process of strategically transacting a large volume of assets over a period to achieve the best possible outcome by balancing the trade-off between market impact costs and timing or…
A classical problem in ergodic continuous time control consists of studying the limit behavior of the optimal value of a discounted cost functional with infinite horizon as the discount factor $\lambda$ tends to zero. In the literature,…
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 consider an optimal control problem for a linear stochastic integro-diffe\-rential equation with conic constraints on the phase variable and the control of singular-regular type. Our setting includes consumption-investment problems for…
The main objective of this paper is to develop a martingale-type solution to optimal consumption--investment choice problems ([Merton, 1969] and [Merton, 1971]) under time-varying incomplete preferences driven by externalities such as…
We formulate a continuous-time competitive equilibrium model of irreversible capacity investment in which a continuum of heterogeneous producers supplies a single non-durable good subject to exogenous stochastic demand. Each producer…
When randomness in demand affects the sales of a product, retailers use dynamic pricing strategies to maximize their profits. In this article, we formulate the pricing problem as a continuous-time stochastic optimal control problem and find…
In this paper, we consider the portfolio optimization problem in a financial market where the underlying stochastic volatility model is driven by n-dimensional Brownian motions. At first, we derive a Hamilton-Jacobi-Bellman equation…
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 paper, we introduce a novel reinforcement learning framework for optimal trade execution in a limit order book. We formulate the trade execution problem as a dynamic allocation task whose objective is the optimal placement of market…