A locally-built, LLM-digested index of recent arXiv papers in quant finance, geometry/topology, and statistical ML — keyword search served straight from SQLite on this machine.
Study solves utility maximization in a transient price impact market.
Transient market impact explained via Nash equilibrium in a game.
Optimal trading strategy adapts to signals in markets with price impact.
We solve the superhedging problem for European options in an illiquid extension of the Black-Scholes model, in which transactions have transient price impact and the costs and the strategies for hedging are affected by physical or cash settlement requirements at maturity. Our analysis is based on a convenient choice of…
Study optimal execution in a transient price impact model with multiple traders.
We study a multiplicative transient price impact model for an illiquid financial market, where trading causes price impact which is multiplicative in relation to the current price, transient over time with finite rate of resilience, and non-linear in the order size. We construct explicit solutions for the optimal contr…
Theory of price impact on bond term structure.
We study portfolio selection in a model with both temporary and transient price impact introduced by Garleanu and Pedersen (2016). In the large-liquidity limit where both frictions are small, we derive explicit formulas for the asymptotically optimal trading rate and the corresponding minimal leading-order performance …
We consider a market impact game for risk-averse agents that are competing in a market model with linear transient price impact and additional transaction costs. For both finite and infinite time horizons, the agents aim to minimize a mean-variance functional of their costs or to maximize the expected exponential u…
Study shows randomized strategies can't be Nash equilibria in markets with transient price impact.
Study optimal liquidation strategies on Uniswap v2/v3 considering price impact.
We give a complete solution to the problem of minimizing the expected liquidity costs in presence of a general drift when the underlying market impact model has linear transient price impact with exponential resilience. It turns out that this problem is well-posed only if the drift is absolutely continuous. Optimal str…
We prove a scaling limit theorem for the super-replication cost of options in a Cox--Ross--Rubinstein binomial model with transient price impact. The correct scaling turns out to keep the market depth parameter constant while resilience over fixed periods of time grows in inverse proportion with the duration between tr…
Optimal energy trading strategy for intraday markets using Hawkes processes.
This study examines how market makers balance risk and impact in foreign exchange markets.
Trading algorithms that execute large orders are susceptible to exploitation by order anticipation strategies. This paper studies the influence of order anticipation strategies in a multi-investor model of optimal execution under transient price impact. Existence and uniqueness of a Nash equilibrium is established unde…
Develops a framework for valuing Asian options with market impact.
We solve the problem of optimal liquidation with volume weighted average price (VWAP) benchmark when the market impact is linear and transient. Our setting is indeed more general as it considers the case when the trading interval is not necessarily coincident with the benchmark interval: Implementation Shortfall and Ta…
Market impact is a key concept in the study of financial markets and several models have been proposed in the literature so far. The Transient Impact Model (TIM) posits that the price at high frequency time scales is a linear combination of the signs of the past executed market orders, weighted by a so-called propagato…
Game theory models how agents trade in a risky asset considering price impact and a common signal.
We propose a minimal theory of non-linear price impact based on a linear (latent) order book approximation, inspired by diffusion-reaction models and general arguments. Our framework allows one to compute the average price trajectory in the presence of a meta-order, that consistently generalizes previously proposed pro…
Study uses machine learning to optimize stock trading strategies.
We consider a Nash equilibrium between two high-frequency traders in a simple market impact model with transient price impact and additional quadratic transaction costs. Extending a result by Schöneborn (2008), we prove existence and uniqueness of the Nash equilibrium and show that for small transaction costs the high-…
Study high-frequency trading game with price impact, finding unique equilibrium.
Modeling option market making with hedging-induced price impact.
Optimal liquidation strategy with price impact and signal exploitation.
Optimal trading strategy derived for nonlinear price impact models.
New model explains why metaorder impact estimation is hard with public data.
Paper optimizes broker performance by estimating execution costs.
We consider a model for linear transient price impact for multiple assets that takes cross-asset impact into account. Our main goal is to single out properties that need to be imposed on the decay kernel so that the model admits well-behaved optimal trade execution strategies. We first show that the existence of such s…
ICON-OCnet solves optimal execution problems with neural networks and few examples.
Previous studies of the stock price response to trades focused on the dynamics of single stocks, i.e. they addressed the self-response. We empirically investigate the price response of one stock to the trades of other stocks in a correlated market, i.e. the cross-responses. How large is the impact of one stock on other…
Optimal trading strategy under market resistance and concave price impact model.
Optimal portfolio choice with cross-impact propagators, solving complex equations.
We study a continuous-time version of the intermediation model of Grossman and Miller (1988). To wit, we solve for the competitive equilibrium prices at which liquidity takers' demands are absorbed by dealers with quadratic inventory costs, who can in turn gradually transfer these positions to an exogenous open market …
Trading large volumes of a financial asset in order driven markets requires the use of algorithmic execution dividing the volume in many transactions in order to minimize costs due to market impact. A proper design of an optimal execution strategy strongly depends on a careful modeling of market impact, i.e. how the pr…
Study Nash equilibrium between broker and trader in a lit exchange with price impact.
Algorithm maximizes revenue-risk by estimating price impact kernel and optimizing control problems.
Study on market instability in multi-agent trading with price impact and transaction costs.
Optimal trading is a recent field of research which was initiated by Almgren, Chriss, Bertsimas and Lo in the late 90's. Its main application is slicing large trading orders, in the interest of minimizing trading costs and potential perturbations of price dynamics due to liquidity shocks. The initial optimization frame…
We study the problem of the optimal execution of a large trade in the presence of nonlinear transient impact. We propose an approach based on homotopy analysis, whereby a well behaved initial strategy is continuously deformed to lower the expected execution cost. We find that the optimal solution is front loaded for co…
We compare optimal static and dynamic solutions in trade execution. An optimal trade execution problem is considered where a trader is looking at a short-term price predictive signal while trading. When the trader creates an instantaneous market impact, it is shown that transaction costs of optimal adaptive strategies …
Previous studies of the stock price response to individual trades focused on single stocks. We empirically investigate the price response of one stock to the trades of other stocks. How large is the impact of one stock on others and vice versa? -- This impact of trades on the price change across stocks appears to be tr…
Paper uses DDPG to learn optimal execution strategies in dynamic markets.
We derive an explicit solution for deterministic market impact parameters in the Graewe and Horst (2017) portfolio liquidation model. The model allows to combine various forms of market impact, namely instantaneous, permanent and temporary. We show that the solutions to the two benchmark models of Almgren and Chris (20…
The electronic platform has been increasingly popular for executing large corporate bond orders by asset managers, who in turn have to assess the quality of their executions via Transaction Cost Analysis (TCA). One of the challenges in TCA is to build a realistic benchmark for the expected transaction cost and to chara…
RL optimizes meta-order execution by adapting to market conditions.
We establish a super-replication duality in a continuous-time financial model where an investor's trades adversely affect bid- and ask-prices for a risky asset and where market resilience drives the resulting spread back towards zero at an exponential rate. Similar to the literature on models with a constant spread, ou…