Related papers: Dynamic slippage control and rejection feedback in…
In this article we study an optimal stopping/optimal control problem which models the decision facing a risk-averse agent over when to sell an asset. The market is incomplete so that the asset exposure cannot be hedged. In addition to the…
In this paper we complete and extend our previous work on stochastic control applied to high frequency market-making with inventory constraints and directional bets. Our new model admits several state variables (e.g. market spread,…
In this work, we consider the optimal portfolio selection problem under hard constraints on trading volume amounts when the dynamics of the risky asset returns are governed by a discrete-time approximation of the Markov-modulated geometric…
We investigate the continuous-time Markowitz mean-variance portfolio selection problem within a multivariate class of fake stationary affine Volterra models. In this non-Markovian and non-semimartingale market framework with unbounded…
We analyze the errors arising from discrete readjustment of the hedging portfolio when hedging options in exponential Levy models, and establish the rate at which the expected squared error goes to zero when the readjustment frequency…
This paper investigates the finite horizon risk-sensitive portfolio optimization in a regime-switching credit market with physical and information-induced default contagion. It is assumed that the underlying regime-switching process has…
The challenge of constructing feedback control laws for risk-averse optimal control of partial differential equations (PDEs) with random coefficients is addressed. The control objective composes a tracking-type cost with the nonlinear…
We revisit optimal execution of an active portfolio in the presence of slippage (aka linear, proportional, or absolute-value) costs. Market efficiency implies a close balance between active alphas and trading costs, so even small changes to…
Stochastic Model Predictive Control addresses uncertainties by incorporating chance constraints that provide probabilistic guarantees of constraint satisfaction. However, simultaneously optimizing over the risk allocation and the feedback…
We consider an optimal trading problem under a market impact model with endogenous market resistance generated by a sophisticated trader who (partially) detects metaorders and trades against them to exploit price overreactions induced by…
We develop a new market-making model, from the ground up, which is tailored towards high-frequency trading under a limit order book (LOB), based on the well-known classification of order types in market microstructure. Our flexible…
Non-equilibrium phenomena occur not only in physical world, but also in finance. In this work, stochastic relaxational dynamics (together with path integrals) is applied to option pricing theory. A recently proposed model (by Ilinski et…
We present a dynamic programming-based solution to a stochastic optimal control problem up to a hitting time for a discrete-time Markov control process. Firstly, we determine an optimal control policy to steer the process toward a compact…
We study an inverse problem of the stochastic optimal control of general diffusions with performance index having the quadratic penalty term of the control process. Under mild conditions on the system dynamics, the cost functions, and the…
We introduce a novel signature approach for pricing and hedging path-dependent options with instantaneous and permanent market impact under a mean-quadratic variation criterion. Leveraging the expressive power of signatures, we recast an…
This paper is concerned with a kind of risk-sensitive optimal control problem for fully coupled forward-backward stochastic systems. The control variable enters the diffusion term of the state equation and the control domain is not…
We study an online market-making problem in which a learner sequentially posts bid and ask prices for a single asset while interacting with traders holding private valuations. Unlike existing online learning formulations that assume fully…
We study OTC bond market making on a size ladder with quadratic inventory penalty and a running target on the dealer's size-weighted hit ratio within a stochastic optimal control approach. We demonstrate that the corresponding reduced…
This paper is split in three parts: first we use labelled trade data to exhibit how market participants accept or not transactions via limit orders as a function of liquidity imbalance; then we develop a theoretical stochastic control…
We study optimal liquidation in the presence of linear temporary and transient price impact along with taking into account a general price predicting finite-variation signal. We formulate this problem as minimization of a cost-risk…