Related papers: Asian option valuation under price impact
The determination of acceptability prices of contingent claims requires the choice of a stochastic model for the underlying asset price dynamics. Given this model, optimal bid and ask prices can be found by stochastic optimization. However,…
We study the pricing of European-style options written on forward contracts within function-valued infinite-dimensional affine stochastic volatility models. The dynamics of the underlying forward price curves are modeled within the…
The statistical properties of the bid-ask spread of a frequently traded Chinese stock listed on the Shenzhen Stock Exchange are investigated using the limit-order book data. Three different definitions of spread are considered based on the…
Market impact has become a subject of increasing concern among academics and industry experts. We put forward a price impact model which considers the heteroscedasticity of price in the time dimension and dependency between permanent impact…
We develop a dynamic multi-agent model of an interbank payment system where banks choose their level of available funds on the basis of private payoff maximisation. The model consists of the repetition of a simultaneous move stage game with…
We study a sequential resource allocation problem motivated by adaptive network recruitment, in which a limited budget of identical resources must be allocated over multiple rounds to individuals with stochastic referral capacity.…
In this paper we discuss the basket options valuation for a jump-diffusion model. The underlying asset prices follow some correlated local volatility diffusion processes with systematic jumps. We derive a forward partial integral…
Assuming that price of the underlying stock is moving in range bound, the Black-Scholes formula for options pricing supports a separation of variables. The resulting time-independent equation is solved employing different behavior of the…
We construct an utility-based dynamic asset pricing model for a limit order market. The price is nonlinear in volume and subject to market impact. We solve an optimal hedging problem under the market impact and derive the dynamics of the…
We present an algorithm producing a dynamic non-self-financing hedging strategy in an incomplete market corresponding to investor-relevant risk criterion. The optimization is a two stage process that first determines admissible model…
We present a simple dynamic equilibrium model for an online exchange where both buyers and sellers arrive according to a exogenously defined stochastic process. The structure of this exchange is motivated by the limit order book mechanism…
We propose and study a simple stochastic model for the dynamics of a limit order book, in which arrivals of market order, limit orders and order cancellations are described in terms of a Markovian queueing system. Through its analytical…
Motivated by the practical challenge in monitoring the performance of a large number of algorithmic trading orders, this paper provides a methodology that leads to automatic discovery of the causes that lie behind a poor trading…
The main objective of this paper is to present an algorithm of pricing perpetual American put options with asset-dependent discounting. The value function of such an instrument can be described as \begin{equation*}…
While the long-ranged correlation of market orders and their impact on prices has been relatively well studied in the literature, the corresponding studies of limit orders and cancellations are scarce. We provide here an empirical study of…
We develop an empirical behavioural order-driven (EBOD) model, which consists of an order placement process and an order cancellation process. Price limit rules are introduced in the definition of relative price. The order placement process…
The paper proposes a class of financial market models which are based on inhomogeneous telegraph processes and jump diffusions with alternating volatilities. It is assumed that the jumps occur when the tendencies and volatilities are…
We model an informed agent with information about the future value of an asset trying to maximize profits when subjected to a transaction cost as well as a market maker tasked with setting fair transaction prices. In a single auction model,…
This paper examines the problem of pricing spread options under some models with jumps driven by Compound Poisson Processes and stochastic volatilities in the form of Cox-Ingersoll-Ross(CIR) processes. We derive the characteristic function…
We study a single risky financial asset model subject to price impact and transaction cost over an finite time horizon. An investor needs to execute a long position in the asset affecting the price of the asset and possibly incurring in…