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http://arks.princeton.edu/ark:/88435/dsp01w0892b00k| Title: | Dynamic Programming and Trade Execution |
| Authors: | Li, Tianhui |
| Advisors: | Carmona, Rene |
| Contributors: | Operations Research and Financial Engineering Department |
| Keywords: | dynamic control microstructure optimal execution trading |
| Subjects: | Mathematics |
| Issue Date: | 2013 |
| Publisher: | Princeton, NJ : Princeton University |
| Abstract: | We apply dynamic programming to two dierent trading problems. We introduce a novel trading model that captures the active-versus-passive order tradeo faced by a broker when benchmarked to VWAP (Volume Weighted Average Price). We are able to solve both the case where the stock quantity is discrete and continuous. The solution is in terms of a highly intuitive forward and backward boundary, for which we even obtain closed-form solutions in certain cases. The second problem is the dynamic hedging of an option under an Almgren-Chriss model of market impact. We are able to derive a highly intuitive dynamic solution. |
| URI: | http://arks.princeton.edu/ark:/88435/dsp01w0892b00k |
| Alternate format: | The Mudd Manuscript Library retains one bound copy of each dissertation. Search for these copies in the library's main catalog |
| Type of Material: | Academic dissertations (Ph.D.) |
| Language: | en |
| Appears in Collections: | Operations Research and Financial Engineering |
Files in This Item:
| File | Description | Size | Format | |
|---|---|---|---|---|
| Li_princeton_0181D_10547.pdf | 2.08 MB | Adobe PDF | View/Download |
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