We develop a trading strategy which employs limit and market orders in a multi-asset economy where the assets are not only correlated, but can also be structurally dependent. To model the structural dependence, the midprice processes follow a multivariate reflected Brownian motion on the closure...

We consider an agent who takes a short position in a contingent claim and employs limit orders (LOs) and market orders (MOs) to trade in the underlying asset to maximize expected utility of terminal wealth. The agent solves a combined optimal stopping and control problem where trading has...

In this study, we aim to build better risk models for energy commodities by employing statistical procedures to identify outliers in the prices for all crude oil and natural gas futures contracts traded on the CME over the period of December 2003 through March 2017. Our results show that it is...

Executing a basket of co-integrated assets is an important task facing investors. Here, we show how to do this accounting for the informational advantage gained from assets within and outside the basket, as well as for the permanent price impact of market orders (MOs) from all market...

We provide two explicit closed-form optimal execution strategies to target VWAP. We do this under very general assumptions about the stochastic process followed by the volume traded in the market, and, unlike earlier studies, we account for permanent price impact stemming from order-flow of the...

We introduce a new stochastic volatility model that includes, as special instances, the Heston (1993) and the 3/2 model of Heston (1997) and Platen (1997). Our model exhibits important features: first, instantaneous volatility can be uniformly bounded away from zero, and second, our model is...

We investigate PDEs of the form u_t = 1/2 σ^2 (t, x)u_{xx} − g(x)u which are associated with the calculation of expectations for a large class of local volatility models. We find nontrivial symmetry groups that can be used to obtain standard integral transforms of fundamental solutions of the...

This paper introduces a more general modeling world than available under the classical no-arbitrage paradigm in finance. New research questions and interesting related econometric studies emerge naturally. To explain in this paper the new approach and illustrate first important consequences, we...

Explicitly taking into account the risk incurred when borrowing at a shorter tenor versus lending at a longer tenor ("roll-over risk"), we construct a stochastic model framework for the term structure of interest rates in which a frequency basis (i.e. a spread applied to one leg of a swap to...

The phenomenon of the frequency basis (i.e. a spread applied to one leg of a swap to exchange one floating interest rate for another of a di fferent tenor in the same currency) contradicts textbook no-arbitrage conditions and has become an important feature of interest rate markets since the...