Related papers: Trading Prophets with Initial Capital
We analyze the relation between earning forecast accuracy and expected profitability of financial analysts. Modeling forecast errors with a multivariate Gaussian distribution, a complete characterization of the payoff of each analyst is…
We consider the multi-period portfolio optimization problem with a single asset that can be held long or short. Due to the presence of transaction costs, maximizing the immediate reward at each period may prove detrimental, as frequent…
The secretary and the prophet inequality problems are central to the field of Stopping Theory. Recently, there has been a lot of work in generalizing these models to multiple items because of their applications in mechanism design. The most…
This paper studies arbitrage pricing theory in financial markets with implicit transaction costs. We extend the existing theory to include the more realistic possibility that the price at which the investors trade is dependent on the traded…
Prophet inequalities consist of many beautiful statements that establish tight performance ratios between online and offline allocation algorithms. Typically, tightness is established by constructing an algorithmic guarantee and a…
We give a detailed characterization of optimal trades under budget constraints in a prediction market with a cost-function-based automated market maker. We study how the budget constraints of individual traders affect their ability to…
Prophet inequalities are a central object of study in optimal stopping theory. In the iid model, a gambler sees values in an online fashion, sampled independently from a given distribution. Upon observing each value, the gambler either…
Addressing the ongoing examination of high-frequency trading practices in financial markets, we report the results of an extensive empirical study estimating the maximum possible profitability of the most aggressive such practices, and…
We consider the problem of optimal trading for a power producer in the context of intraday electricity markets. The aim is to minimize the imbalance cost induced by the random residual demand in electricity, i.e. the consumption from the…
In the Learning to Price setting, a seller posts prices over time with the goal of maximizing revenue while learning the buyer's valuation. This problem is very well understood when values are stationary (fixed or iid). Here we study the…
In this paper we consider a modification of the classical Merton portfolio optimization problem. Namely, an investor can trade in financial asset and consume his capital. He is additionally endowed with a one unit of an indivisible asset…
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…
The present article provides a novel theoretical way to evaluate tradeability in markets of ordinary exponential L\'evy type. We consider non-tradeability as a particular type of market illiquidity and investigate its impact on the price of…
We study the prophet secretary problem, a well-studied variant of the classic prophet inequality, where values are drawn from independent known distributions but arrive in uniformly random order. Upon seeing a value at each step, the…
We introduce a stochastic price model where, together with a random component, a moving average of logarithmic prices contributes to the price formation. Our model is tested against financial datasets, showing an extremely good agreement…
We introduce a simple stochastic volatility model, whose novelty consists in taking into account hitting times of the asset price, and study the optimal stopping problem corresponding to a put option whose time horizon (after the asset…
This article considers the pricing and hedging of a call option when liquidity matters, that is, either for a large nominal or for an illiquid underlying asset. In practice, as opposed to the classical assumptions of a price-taking agent in…
We consider an optimal stopping problem with n correlated offers where the goal is to design a (randomized) stopping strategy that maximizes the expected value of the offer in the sequence at which we stop. Instead of assuming to know the…
Prospect theory is widely viewed as the best available descriptive model of how people evaluate risk in experimental settings. According to prospect theory, people are risk-averse with respect to gains and risk-seeking with respect to…
We consider the problem of maximizing portfolio value when an agent has a subjective view on asset value which differs from the traded market price. The agent's trades will have a price impact which affect the price at which the asset is…