Related papers: Optimal Liquidation in a Defaultable Market
This article deals with the problem of optimal allocation of capital to corporate bonds in fixed income portfolios when there is the possibility of correlated defaults. Under fairly general assumptions for the distribution of the total net…
We consider the stochastic control problem of a financial trader that needs to unwind a large asset portfolio within a short period of time. The trader can simultaneously submit active orders to a primary market and passive orders to a dark…
The scope of this paper is to study the optimal stopping problems associated to a stochastic process, which may represent the gain of an investment, for which information on the final value is available a priori. This information may…
This paper considers optimal control problem of a large insurance company under a fixed insolvency probability. The company controls proportional reinsurance rate, dividend pay-outs and investing process to maximize the expected present…
It is widely recognized that when classical optimal strategies are applied with parameters estimated from data, the resulting portfolio weights are remarkably volatile and unstable over time. The predominant explanation for this is the…
We study the optimal liquidation problem in a market model where the bid price follows a geometric pure jump process whose local characteristics are driven by an unobservable finite-state Markov chain and by the liquidation rate. This model…
This paper deals with numerical solutions to an impulse control problem arising from optimal portfolio liquidation with bid-ask spread and market price impact penalizing speedy execution trades. The corresponding dynamic programming (DP)…
We consider an optimal liquidation problem with instantaneous price impact and stochastic resilience for small instantaneous impact factors. Within our modelling framework, the optimal portfolio process converges to the solution of an…
We provide an extension of the explicit solution of a mixed optimal stopping-optimal stochastic control problem introduced by Henderson and Hobson. The problem examines wether the optimal investment problem on a local martingale financial…
In this paper we solve the hedge fund manager's optimization problem in a model that allows for investors to enter and leave the fund over time depending on its performance. The manager's payoff at the end of the year will then depend not…
Even in the face of deteriorating and highly volatile demand, firms often invest in, rather than discard, aging technologies. In order to study this phenomenon, we model the firm's profit stream as a Brownian motion with negative drift. At…
This paper studies a portfolio optimization problem in a discrete-time Markovian model of a financial market, in which asset price dynamics depend on an external process of economic factors. There are transaction costs with a structure that…
This paper presents several models addressing optimal portfolio choice, optimal portfolio liquidation, and optimal portfolio transition issues, in which the expected returns of risky assets are unknown. Our approach is based on a coupling…
We are considering the problem of optimal portfolio delegation between an investor and a portfolio manager under a random default time. We focus on a novel variation of the Principal-Agent problem adapted to this framework. We address the…
In this article, we develop a general framework to study optimal execution and to price block trades. We prove existence of optimal liquidation strategies and we provide regularity results for optimal strategies under very general…
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 derive the optimal execution trajectory for a trader who wishes to buy or sell a large position of shares which evolve as a geometric Brownian process in contrast to the arithmetic model which prevails in the existing…
This paper studies an optimal investing problem for a retiree facing longevity risk and living standard risk. We formulate the investing problem as a portfolio choice problem under a time-varying risk capacity constraint. We derive the…
We give a general formulation of the utility maximization problem under nondominated model uncertainty in discrete time and show that an optimal portfolio exists for any utility function that is bounded from above. In the unbounded case,…
We solve two stochastic control problems in which a player tries to minimize or maximize the exit time from an interval of a Brownian particle, by controlling its drift. The player can change from one drift to another but is subject to a…