Related papers: Optimal Convergence Trading
We consider the problem of active portfolio management, where an investor seeks the portfolio with maximal expected utility of the difference between the terminal wealth of their strategy and a proportion of the benchmark's, subject to a…
As a fundamental problem in algorithmic trading, order execution aims at fulfilling a specific trading order, either liquidation or acquirement, for a given instrument. Towards effective execution strategy, recent years have witnessed the…
For an investor with constant absolute risk aversion and a long horizon, who trades in a market with constant investment opportunities and small proportional transaction costs, we obtain explicitly the optimal investment policy, its implied…
This paper addresses the question of how to invest in a robust growth-optimal way in a market where the instantaneous expected return of the underlying process is unknown. The optimal investment strategy is identified using a generalized…
In this paper we consider a pairs trading financial market with the spread of risky assets defined by the Ornstein-Uhlenbeck (OU) process. We implement an optimal strategy for power utility functions for investment/consumption problem.…
In a classical optimal stopping problem the aim is to maximize the expected value of a functional of a diffusion evaluated at a stopping time. This note considers optimal stopping problems beyond this paradigm. We study problems in which…
We consider the multi-period portfolio optimization problem with a single asset that can be held long or short. Due to the presence of transaction costs, maximizing the immediate reward at each period may prove detrimental, as frequent…
We introduce a dynamic credit portfolio framework where optimal investment strategies are robust against misspecifications of the reference credit model. The risk-averse investor models his fear of credit risk misspecification by…
This paper provides threshold policies with tight guarantees for online selection with convex cost (OSCC). In OSCC, a seller wants to sell some asset to a sequence of buyers with the goal of maximizing her profit. The seller can produce…
The classical optimal trading problem is the closure of a position in an asset over a time interval; the trader maximizes an expected utility under the constraint that the position be fully closed by terminal time. Since the asset price is…
In this work, we consider the optimal portfolio selection problem under hard constraints on trading amounts, transaction costs and different rates for borrowing and lending when the risky asset returns are serially correlated. No…
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 study the optimal investment stopping problem in both continuous and discrete case, where the investor needs to choose the optimal trading strategy and optimal stopping time concurrently to maximize the expected utility of terminal…
A novel procedure is presented for the objective comparison and evaluation of a bank's decision rules in optimising the timing of loan recovery. This procedure is based on finding a delinquency threshold at which the financial loss of a…
This paper investigates the optimal hedging strategies of an informed broker interacting with multiple traders in a financial market. We develop a theoretical framework in which the broker, possessing exclusive information about the drift…
We study an optimal liquidation problem with multiplicative price impact in which the trend of the asset's price is an unobservable Bernoulli random variable. The investor aims at selling over an infinite time-horizon a fixed amount of…
We develop a theory for option pricing with perfect hedging in an inefficient market model where the underlying price variations are autocorrelated over a time tau. This is accomplished by assuming that the underlying noise in the system is…
Following a series of works on capital growth investment, we analyse log-optimal portfolios where the return evaluation includes `weights' of different outcomes. The results are twofold: (A) under certain conditions, the logarithmic growth…
We study T. Cover's rebalancing option (Ordentlich and Cover 1998) under discrete hindsight optimization in continuous time. The payoff in question is equal to the final wealth that would have accrued to a $\$1$ deposit into the best of…
The classical optimal investment and consumption problem with infinite horizon is studied in the presence of transaction costs. Both proportional and fixed costs as well as general utility functions are considered. Weak dynamic programming…