Related papers: Optimal Execution under Liquidity Uncertainty
We develop a comprehensive mathematical and computational framework for optimal production planning in economies governed by stochastic regime switches driven by a continuous-time Markov chain. The value functions of the underlying…
Merton portfolio management problem is studied in this paper within a stochastic volatility, non constant time discount rate, and power utility framework. This problem is time inconsistent and the way out of this predicament is to consider…
The classical optimal trading problem is the closure of a position in an asset over a time interval; the trader maximizes an expected utility under the constraint that the position be fully closed by terminal time. Since the asset price is…
Large scale electricity storage is set to play an increasingly important role in the management of future energy networks. A major aspect of the economics of such projects is captured in arbitrage, i.e. buying electricity when it is cheap…
We study $N$-player optimal execution games in an Obizhaeva--Wang model of transient price impact. When the game is regularized by an instantaneous cost on the trading rate, a unique equilibrium exists and we derive its closed form. Whereas…
To execute a trade, participants in electronic equity markets may choose to submit limit orders or market orders across various exchanges where a stock is traded. This decision is influenced by the characteristics of the order flow and…
We study the optimal investment-consumption problem for a member of defined contribution plan during the decumulation phase. For a fixed annuitization time, to achieve higher final annuity, we consider a variable consumption rate. Moreover,…
Evolutions of the trading landscape lead to the capability to exchange the same financial instrument on different venues. Because of liquidity issues, the trading firms split large orders across several trading destinations to optimize…
We present a dynamic programming-based solution to a stochastic optimal control problem up to a hitting time for a discrete-time Markov control process. Firstly, we determine an optimal control policy to steer the process toward a compact…
We consider an optimal trading problem under a market impact model with endogenous market resistance generated by a sophisticated trader who (partially) detects metaorders and trades against them to exploit price overreactions induced by…
In this paper, we explore a new class of stochastic control problems characterized by specific control constraints. Specifically, the admissible controls are subject to the ratcheting constraint, meaning they must be non-decreasing over…
Optimal execution is an important problem faced by any trader. Most solutions are based on the assumption of constant market impact, while liquidity is known to be dynamic. Moreover, models with time-varying liquidity typically assume that…
We compare optimal static and dynamic solutions in trade execution. An optimal trade execution problem is considered where a trader is looking at a short-term price predictive signal while trading. When the trader creates an instantaneous…
We investigate a continuous-time investment-consumption problem with model uncertainty in a general diffusion-based market with random model coefficients. We assume that a power utility investor is ambiguity-averse, with the preference to…
Trading frictions are stochastic. They are, moreover, in many instances fast-mean reverting. Here, we study how to optimally trade in a market with stochastic price impact and study approximations to the resulting optimal control problem…
In this study, we extend the optimal execution problem with convex market impact function studied in Kato (2014) to the case where the market impact function is S-shaped, that is, concave on $[0, \bar {x}_0]$ and convex on $[\bar {x}_0,…
This paper studies the finite horizon portfolio management by optimally tracking a ratcheting capital benchmark process. It is assumed that the fund manager can dynamically inject capital into the portfolio account such that the total…
We investigate the optimal strategy over a finite time horizon for a portfolio of stock and bond and a derivative in an multiplicative Markovian market model with transaction costs (friction). The optimization problem is solved by a…
In this article, we consider the optimal execution problem associated to accelerated share repurchase contracts. When firms want to repurchase their own shares, they often enter such a contract with a bank. The bank buys the shares for the…
This article studies a portfolio optimization problem, where the market consisting of several stocks is modeled by a multi-dimensional jump-diffusion process with age-dependent semi-Markov modulated coefficients. We study risk sensitive…