Related papers: Dynamic slippage control and rejection feedback in…
Market makers continuously set bid and ask quotes for the stocks they have under consideration. Hence they face a complex optimization problem in which their return, based on the bid-ask spread they quote and the frequency at which they…
We study a an optimal high frequency trading problem within a market microstructure model designed to be a good compromise between accuracy and tractability. The stock price is driven by a Markov Renewal Process (MRP), while market orders…
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…
The rapid growth of weather-dependent renewable generation increases price volatility and imbalance penalty risk in power markets, creating the need for advanced quantitative trading strategies. We develop a data-driven continuous-time…
Over the past decade, many dealers have implemented algorithmic models to automatically respond to RFQs and manage flows originating from their electronic platforms. In parallel, building on the foundational work of Ho and Stoll, and later…
We consider the problem of stochastic optimal control, where the state-feedback control policies take the form of a probability distribution and where a penalty on the entropy is added. By viewing the cost function as a Kullback- Leibler…
We consider a two-sided singular stochastic control problem with a risk-sensitive ergodic criterion. In particular, we consider a stochastic system whose uncontrolled dynamics are modelled by a linear diffusion. The control that can be…
This paper deals with an optimal position management problem for a market maker who has to face uncertain customer order flows in an illiquid market, where the market maker's continuous trading incurs a stochastic linear price impact.…
We develop a methodology for index tracking and risk exposure control using financial derivatives. Under a continuous-time diffusion framework for price evolution, we present a pathwise approach to construct dynamic portfolios of…
Control of drawdown, that is, the control of the drops in wealth over time from peaks to subsequent lows, is of great concern from a risk management perspective. With this motivation in mind, the focal point of this paper is to address the…
Stochastic optimal control problems have a long tradition in applied probability, with the questions addressed being of high relevance in a multitude of fields. Even though theoretical solutions are well understood in many scenarios, their…
The problem of order execution is cast as a relative entropy-regularized robust optimal control problem in this article. The order execution agent's goal is to maximize an objective functional associated with his profit-and-loss of trading…
The paper investigates data-driven output-feedback predictive control of linear systems subject to stochastic disturbances. The scheme relies on the recursive solution of a suitable data-driven reformulation of a stochastic Optimal Control…
Starting from the Avellaneda-Stoikov framework, we consider a market maker who wants to optimally set bid/ask quotes over a finite time horizon, to maximize her expected utility. The intensities of the orders she receives depend not only on…
In this paper, we consider a class of stochastic optimal control problems with risk constraints that are expressed as bounded probabilities of failure for particular initial states. We present here a martingale approach that diffuses a risk…
Recent literature has made much progress in understanding \emph{online LQR}: a modern learning-theoretic take on the classical control problem in which a learner attempts to optimally control an unknown linear dynamical system with fully…
This paper addresses the problem of computing optimal impedance schedules for legged locomotion tasks involving complex contact interactions. We formulate the problem of impedance regulation as a trade-off between disturbance rejection and…
This paper addresses the challenges faced in large-volume trading, where executing substantial orders can result in significant market impact and slippage. To mitigate these effects, this study proposes a volatility-volume-based order…
In this paper we extend the market-making models with inventory constraints of Avellaneda and Stoikov ("High-frequency trading in a limit-order book", Quantitative Finance Vol.8 No.3 2008) and Gueant, Lehalle and Fernandez-Tapia ("Dealing…
We develop a model for pricing, lead-time quotation and delay compensation in a Markovian make-to-order production or service system with strategic customers who exhibit risk aversion. Based on a concave utility function of their net…