Related papers: On Bellman equation in the limit order optimizatio…
In this article, we design and analyze a Hybrid High-Order (HHO) finite element approximation for a class of strongly nonlinear boundary value problems. We consider an HHO discretization for a suitable linearized problem and show its…
We study OTC bond market making on a size ladder with quadratic inventory penalty and a running target on the dealer's size-weighted hit ratio within a stochastic optimal control approach. We demonstrate that the corresponding reduced…
Efficient optimal prefix coding has long been accomplished via the Huffman algorithm. However, there is still room for improvement and exploration regarding variants of the Huffman problem. Length-limited Huffman coding, useful for many…
We define a stochastic model of a two-sided limit order book in terms of its key quantities \textit{best bid [ask] price} and the \textit{standing buy [sell] volume density}. For a simple scaling of the discreteness parameters, that keeps…
Efficient optimal prefix coding has long been accomplished via the Huffman algorithm. However, there is still room for improvement and exploration regarding variants of the Huffman problem. Length-limited Huffman coding, useful for many…
We prove precise rates of convergence for monotone approximation schemes of fractional and nonlocal Hamilton-Jacobi-Bellman (HJB) equations. We consider diffusion corrected difference-quadrature schemes from the literature and new…
We show that the Bellman operator underlying the options framework leads to a matrix splitting, an approach traditionally used to speed up convergence of iterative solvers for large linear systems of equations. Based on standard comparison…
We analyse the regret arising from learning the price sensitivity parameter $\kappa$ of liquidity takers in the ergodic version of the Avellaneda-Stoikov market making model. We show that a learning algorithm based on a maximum-likelihood…
Dating back to the seminal work of von Neumann [von Neumann, Automata Studies, 1956], it is known that error correcting codes can overcome faulty circuit components to enable robust computation. Choosing an appropriate code is non-trivial…
In this paper we develop a statistical arbitrage trading strategy with two key elements in hi-frequency trading: stop-loss and leverage. We consider, as in Bertram (2009), a mean-reverting process for the security price with proportional…
Managing a book of options on several underlying involves controlling positions of several thousands of financial assets. It is one of the most challenging financial problems involving both pricing and microstructural modeling. An options…
We consider a dynamic portfolio optimization problem that incorporates predictable returns, instantaneous transaction costs, price impact, and stochastic volatility, extending the classical results of Garleanu and Pedersen (2013), which…
We study whether a risk-sensitive objective from asset-pricing theory -- recursive utility -- improves reinforcement learning for portfolio allocation. The Bellman equation under recursive utility involves a certainty equivalent (CE) of…
The global ambitions of a carbon-neutral society necessitate a stable and robust smart grid that capitalises on frequency reserves of renewable energy. Frequency reserves are resources that adjust power production or consumption in real…
R. Cont and A. de Larrard (SIAM J. Finan. Math, 2013) introduced a tractable stochastic model for the dynamics of a limit order book, computing various quantities of interest such as the probability of a price increase or the diffusion…
We introduce and study a simple model of a limit order-driven market. Traders in this model can either trade at the market price or place a limit order, i.e. an instruction to buy (sell) a certain amount of the stock if its price falls…
This paper deals with a fundamental subject that has seldom been addressed in recent years, that of market impact in the options market. Our analysis is based on a proprietary database of metaorders-large orders that are split into smaller…
We study the Hamiltonian truncation for the two-dimensional $\lambda\phi^4$ theory within the framework of Hamiltonian truncation effective theory, where truncation artifacts are mitigated through a systematic inclusion of corrective terms…
We continue the study of the performance for fixed-price mechanisms in the bilateral trade problem, and improve approximation ratios of welfare-optimal mechanisms in several settings. Specifically, in the case where only the buyer…
We consider an example by Haviv (1996) of a constrained Markov decision process that, in some sense, violates Bellman's principle. We resolve this issue by showing how to preserve a form of Bellman's principle that accounts for a change of…