Finite-Fuel Singular Control With Discretionary Stopping

Karatzas, Ioannis; Ocone, Daniel; Wang, Hui; Zervos, Mihail

doi:10.1080/17442500008834257

Cited by 44 publications

(47 citation statements)

References 11 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…When one wants to track a Brownian Motion this is very similar to the monotone follower problem discussed in Bayraktar and Egami [7], Beneš et al [9] and Karatzas et al [22] amongst many others. In the finance literature, H. Leland (unpublished) considers a situation where an investor aims to maintain fixed proportions of his wealth in a given selection of stocks, in a market where there are proportional transaction costs.…”

Section: Introductionmentioning

confidence: 85%

Curve following in illiquid markets

Naujokat

Westray

2011

Math Finan Econ

View full text Add to dashboard Cite

In this article the problem of curve following in an illiquid market is addressed. The optimal control is characterised in terms of the solution to a coupled FBSDE involving jumps via the technique of the stochastic maximum principle. Analysing this FBSDE, we further show that there are buy and sell regions. In the case of quadratic penalty functions the FBSDE admits an explicit solution which is determined via the four step scheme. The dependence of the optimal control on the target curve is studied in detail.Keywords Stochastic maximum principle · Convex analysis · Fully coupled forward backward stochastic differential equations · Trading in illiquid markets JEL Classification 93E20 · 91G80 · C02 · C61

show abstract

Section: Introductionmentioning

confidence: 85%

Curve following in illiquid markets

Naujokat

Westray

2011

Math Finan Econ

View full text Add to dashboard Cite

show abstract

“…Problem (33) falls into the category of Þnite-fuel stochastic control problems (see Beneš et al (1980), Karatzas and Shreve (1986), or Karatzas et al (2000)). Unfortunately, none of the techniques in the stochastic control literature can be applied to (33) for general V .…”

Section: Liquidity Trading In Continuous Timementioning

confidence: 99%

Optimal Liquidity Trading*

Huberman¹,

Stanzl²

2005

Review of Finance

163

View full text Add to dashboard Cite

A liquidity trader wishes to trade a Þxed number of shares within a certain time horizon and to minimize the mean and variance of the costs of trading. Explicit formulas for the optimal trading strategies show that risk-averse liquidity traders reduce their order sizes over time and execute a higher fraction of their total trading volume in early periods when price volatility or liquidity increases. In the presence of transaction fees, numerical simulations suggest that traders want to trade more frequently when price volatility goes up or liquidity declines. In the multi-asset case, price effects across assets have a substantial impact on trading behavior, as does continuous-time trading.JEL classiÞcation: C6; G1

show abstract

“…Control problems with discretionary stopping are addressed in the recent literature( [10], [12], [13]). In these articles, only the drift coefficient is allowed to control and the diffusion coefficient is strictly non-degenerate.…”

Section: Main Results and Their Importancementioning

confidence: 99%

Controlled Stochastic Dynamical Systems

Weerasinghe¹

2007

View full text Add to dashboard Cite

Finite-Fuel Singular Control With Discretionary Stopping

Cited by 44 publications

References 11 publications

Curve following in illiquid markets

Curve following in illiquid markets

Optimal Liquidity Trading*

Controlled Stochastic Dynamical Systems

Contact Info

Product

Resources

About