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Algorithmic trading (AT) and high-frequency (HF) trading, which are responsible for over 70% of US stocks trading volume, have greatly changed the microstructure dynamics of tick-by-tick stock data. In this article, we employ a hidden Markov model to examine how the intraday dynamics of the...
Persistent link: https://www.econbiz.de/10010824919
We provide an explicit closed-form strategy for an investor who executes a large order when market order-flow from all agents, including the investor's own trades, has a permanent price impact. The strategy is found in closed-form when the permanent and temporary price impacts are linear in the...
Persistent link: https://www.econbiz.de/10013005358
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...
Persistent link: https://www.econbiz.de/10013005514
We introduce a new approach to incorporate uncertainty into the decision to invest in a commodity reserve. The investment is an irreversible one-off capital expenditure, after which the investor receives a stream of cashflow from extracting the commodity and selling it on the spot market. The...
Persistent link: https://www.econbiz.de/10012972668
Agents who acknowledge that their models are incorrectly specified are said to be ambiguity averse, and this affects the prices they are willing to trade at. Models for prices of commodities attempt to capture three stylized features: seasonal trend, moderate deviations (a diffusive factor), and...
Persistent link: https://www.econbiz.de/10013022682
We show how to optimally take positions in the limit order book by placing limit orders at-the-touch when the midprice of the asset is affected by the trading activity of the market. The midprice dynamics have a short-term-alpha component which reflects how instantaneous net order-flow, the...
Persistent link: https://www.econbiz.de/10013029876
We develop an optimal execution policy for an investor seeking to execute a large order using limit and market orders. The investor solves the optimal policy considering different restrictions on volume of both types of orders and depth at which limit orders are posted. We show how the execution...
Persistent link: https://www.econbiz.de/10013034161
We develop a High Frequency (HF) trading strategy where the HF trader uses her superior speed to process information and to post limit sell and buy orders. By introducing a multi-factor mutually-exciting process we allow for feedback effects in market buy and sell orders and the shape of the...
Persistent link: https://www.econbiz.de/10013037469
Algorithmic Trading (AT) and High Frequency (HF) trading, which are responsible for over 70\% of US stocks trading volume, have greatly changed the microstructure dynamics of tick-by-tick stock data. In this paper we employ a hidden Markov model to examine how the intra-day dynamics of the stock...
Persistent link: https://www.econbiz.de/10013068921
We develop a high frequency (HF) trading strategy where the HF trader uses her superior speed to process information and to post limit sell and buy orders. By introducing a multifactor mutually exciting process we allow for feedback effects in market buy and sell orders and the shape of the...
Persistent link: https://www.econbiz.de/10012896261