Séminaire FDD-FiME // E. Abi Jaber

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Séminaire FDD-FiME // E. Abi Jaber

16 décembre 2022 @ 14 h 00 min - 15 h 00 min

Title :
Optimal Liquidation with Signals: the General Propagator Case

Abstract :
We consider a class of optimal liquidation problems where the agent's transactions create transient price impact driven by a Volterra-type propagator along with temporary price impact. We formulate these problems as minimization of a revenue-risk functionals, where the agent also exploits available information on a progressively measurable price predicting signal. By using an infinite dimensional stochastic control approach, we characterize the value function in terms of a solution to a free-boundary L2-valued backward stochastic differential equation and an operator-valued Riccati equation. We then derive analytic solutions to these equations which yields an explicit expression for the optimal trading strategy. We show that our formulas can be implemented in a straightforward and efficient way for a large class of price impact kernels with possible singularities such as the power-law kernel.

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Date :
16 décembre 2022
Heure :
14 h 00 min - 15 h 00 min


Institut Henri Poincaré