We derive dynamic optimal trading strategies that minimize the expected cost of trading a large block of equity over a fixed time horizon. Specifically, given a fixed block $\overline{S}$ of shares to be executed within a fixed finite number of periods $T$, and given a price-impact function that...

Given a European derivative security with an arbitrary payoff function and a corresponding set ofquot; underlying securities on which the derivative security is based, we solve the dynamic replication problem: find aquot; self-financing dynamic portfolio strategy involving only the underlying...

Continuous-time stochastic processes have become central to many disciplines, yet the fact that they are approximations to physically realizable phenomena is often overlooked. We quantify one aspect of the approximation errors of continuous-time models by investigating the replication errors...

Given a European derivative security with an arbitrary payoff function and a corresponding set of" underlying securities on which the derivative security is based, we solve the dynamic replication problem: find a" self-financing dynamic portfolio strategy involving only the underlying securities...