Related papers: Trading Prophets with Initial Capital
The online search problem is a fundamental problem in finance. The numerous direct applications include searching for optimal prices for commodity trading and trading foreign currencies. In this paper, we analyze the advice complexity of…
The prophet inequality is one of the cornerstone problems in optimal stopping theory and has become a crucial tool for designing sequential algorithms in Bayesian settings. In the i.i.d. $k$-selection prophet inequality problem, we…
In our problem, we are given access to a number of sequences of nonnegative i.i.d. random variables, whose realizations are observed sequentially. All sequences are of the same finite length. The goal is to pick one element from each…
We propose that predictability is a prerequisite for profitability on financial markets. We look at ways to measure predictability of price changes using information theoretic approach and employ them on all historical data available for…
Whether you trade futures for yourself or a hedge fund, your strategy is counted. Long and short position limits make the number of unique strategies finite. Formulas of the numbers of strategies, transactions, do nothing actions are…
Hill and Kertz studied the prophet inequality on iid distributions [The Annals of Probability 1982]. They proved a theoretical bound of $1-\frac{1}{e}$ on the approximation factor of their algorithm. They conjectured that the best…
Suppose a customer is faced with a sequence of fluctuating prices, such as for airfare or a product sold by a large online retailer. Given distributional information about what price they might face each day, how should they choose when to…
We investigate activities that have different periods of duration. We define the profit intensity as a measure of this economic category. The profit intensity in a repeated trading has a unique property of attaining its maximum at a fixed…
We introduce a strategic decision-making problem faced by logistics providers (LPs) seeking facility location decisions that lead to profitable operations. The profitability depends on the revenue generated through agreements with shippers,…
We study bilateral trade with interdependent values as an informed-principal problem. The mechanism-selection game has multiple equilibria that differ with respect to principal's payoff and trading surplus. We characterize the equilibrium…
We study a principal-agent problem with adverse selection, where the principal does not know the agent's true cost but must design a contract to optimize a specific criterion. Unlike standard screening frameworks that allow for…
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…
Forecasting stock returns is a challenging problem due to the highly stochastic nature of the market and the vast array of factors and events that can influence trading volume and prices. Nevertheless it has proven to be an attractive…
Market participants regularly send bid and ask quotes to exchange-operated limit order books. This creates an optimization challenge where their potential profit is determined by their quoted price and how often their orders are…
In this paper, we present a multi-period trading model in the style of Kyle (1985)'s inside trading model, by assuming that there are at least two insiders in the market with long-lived private information, under the requirement that each…
This paper develops a mathematical framework for building a position in a stock over a fixed period of time while in competition with one or more other traders doing the same thing. We develop a game-theoretic framework that takes place in…
We investigate the portfolio execution problem under a framework in which volatility and liquidity are both uncertain. In our model, we assume that a multidimensional Markovian stochastic factor drives both of them. Moreover, we model…
In commodity markets the convergence of futures towards spot prices, at the expiration of the contract, is usually justified by no-arbitrage arguments. In this article, we propose an alternative approach that relies on the expected profit…
Although there is a wide use of technical trading rules in stock markets, the profitability of them still remains controversial. This paper first presents and proves the upper bound of cumulative return, and then introduces many of…
In the seminal paper on optimal execution of portfolio transactions, Almgren and Chriss (2001) define the optimal trading strategy to liquidate a fixed volume of a single security under price uncertainty. Yet there exist situations, such as…