Design of model predictive control for constrained Markov jump linear systems with multiplicative noises and online portfolio selection

In this paper, we consider model predictive control for a class of constraine

Прогнозирующее управление стохастическими нелинейными системами с сериально коррелированными параметрами при ограничениях

Рассматривается задача управления с прогнозированием по квадратичному критерию для нелинейных дискретных систем с сериально коррелированными параметрами. Синтезированы стратегии управления при наличии явных ограничений на управляющие воздействия. Алгоритм синтеза прогнозирующей стратегии сводится к решению последовательности задач квадратичного программирования

Dynamic Trading Strategies in the Presence of Market Frictions

This thesis studies the impact of various fundamental frictions in the microstructure of financial markets. Specific market frictions we consider are latency in high-frequency trading, transaction costs arising from price impact or commissions, unhedgeable inventory risks due to stochastic volatility and time-varying liquidity costs. We explore the implications of each of these frictions in rigorous theoretical models from an investor's point of view and derive analytical expressions or efficient computational procedures for dynamic strategies. Specific methodologies in computing these policies include stochastic control theory, dynamic programming and tools from applied probability and stochastic processes. In the first chapter, we describe a theoretical model for the quantitative valuation of latency and its impact on the optimal dynamic trading strategy. Our model measures the trading frictions created by the presence of latency, by considering the optimal execution problem of a representative investor. Via a dynamic programming analysis, our model provides a closed-form expression for the cost of latency in terms of well-known parameters of the underlying asset. We implement our model by estimating the latency cost incurred by trading on a human time scale. Examining NYSE common stocks from 1995 to 2005 shows that median latency cost across our sample more than tripled during this time period. In the second chapter, we provide a highly tractable dynamic trading policy for portfolio choice problems with return predictability and transaction costs. Our rebalancing rule is a linear function of the return predicting factors and can be utilized in a wide spectrum of portfolio choice models with minimal assumptions. Linear rebalancing rules enable to compute exact and efficient formulations of portfolio choice models with linear constraints, proportional and nonlinear transaction costs, and quadratic utility function on the terminal wealth. We illustrate the implementation of the best linear rebalancing rule in the context of portfolio execution with positivity constraints in the presence of short-term predictability. We show that there exists a considerable performance gain in using linear rebalancing rules compared to static policies with shrinking horizon or a dynamic policy implied by the solution of the dynamic program without the constraints. Finally, in the last chapter, we propose a factor-based model that incorporates common factor shocks for the security returns. Under these realistic factor dynamics, we solve for the dynamic trading policy in the class of linear policies analytically. Our model can accommodate stochastic volatility and liquidity costs as a function of factor exposures. Calibrating our model with empirical data, we show that our trading policy achieves superior performance in the presence of common factor shocks

Optimal trading with frictions

This thesis studies the optimal trading problem with particular attention to frictions, taking alpha signals as given in several practical settings in modern financial markets. Chapter 2 provides a reduced-form model for price impact of market orders. As a scaling limit of the econo-physics propagator model, it has both tractability for optimization and good empirical fit. The nonlinearity in propagator model is explained as a effect of intraday stochasticity of the market activity. Optimal trading strategies are given for the case of stochastic alpha signal and volume signals in closed-form solutions. Moreoever, concrete bounds for the absence of price manipulation strategies are provided. Chapter 3 derives an actionable derivatives hedging strategy with both market and limit orders from the perspective of a central risk book. It is found that limit order is only beneficial for delta-hedging when the gamma of the risky position is negative. Additionally, the interaction between transaction cost, adverse selection and risk aversion can be characterized by a nonlinear PDE that describes the option price. According to empirical analysis, tactical liquidity provision is beneficial for non-competitive market makers for reasonable trading frequencies. Chapter 4 studies the usage of display and nondisplay limit orders for order execution. A price impact model is postulated and the corresponding scheduling algorithm is derived. In the case where nondisplay limit order (hidden order) is used, there is a time which separates the trading horizon into two regimes: the former only uses hidden order, and the latter uses the mixture of limit and hidden orders. The effectiveness and robustness of the algorithm is shown via numerical testing in both simulated data and NASDAQ 100 Index data.Open Acces

Untangling hotel industry’s inefficiency: An SFA approach applied to a renowned Portuguese hotel chain

The present paper explores the technical efficiency of four hotels from Teixeira Duarte Group - a renowned Portuguese hotel chain. An efficiency ranking is established from these four hotel units located in Portugal using Stochastic Frontier Analysis. This methodology allows to discriminate between measurement error and systematic inefficiencies in the estimation process enabling to investigate the main inefficiency causes. Several suggestions concerning efficiency improvement are undertaken for each hotel studied.info:eu-repo/semantics/publishedVersio

Solving Multi-objective Integer Programs using Convex Preference Cones

Esta encuesta tiene dos objetivos: en primer lugar, identificar a los individuos que fueron víctimas de algún tipo de delito y la manera en que ocurrió el mismo. En segundo lugar, medir la eficacia de las distintas autoridades competentes una vez que los individuos denunciaron el delito que sufrieron. Adicionalmente la ENVEI busca indagar las percepciones que los ciudadanos tienen sobre las instituciones de justicia y el estado de derecho en Méxic

Essays on strategic trading

This dissertation discusses various aspects of strategic trading using both analytical modeling and numerical methods. Strategic trading, in short, encompasses models of trading, most notably models of optimal execution and portfolio selection, in which one seeks to rigorously consider various---both explicit and implicit---costs stemming from the act of trading itself. The strategic trading approach, rooted in the market microstructure literature, contrasts with many classical finance models in which markets are assumed to be frictionless and traders can, for the most part, take prices as given. Introducing trading costs to dynamic models of financial markets tend to complicate matters. First, the objectives of the traders become more nuanced since now overtrading leads to poor outcomes due to increased trading costs. Second, when trades affect prices and there are multiple traders in the market, the traders start to behave in a more calculated fashion, taking into account both their own objectives and the perceived actions of others. Acknowledging this strategic behavior is especially important when the traders are asymmetrically informed. These new features allow the models discussed to better reflect aspects real-world trading, for instance, intraday trading patterns, and enable one to ask and answer new questions, for instance, related to the interactions between different traders. To efficiently analyze the models put forth, numerical methods must be utilized. This is, as is to be expected, the price one must pay from added complexity. However, it also opens an opportunity to have a closer look at the numerical approaches themselves. This opportunity is capitalized on and various new and novel computational procedures influenced by the growing field of numerical real algebraic geometry are introduced and employed. These procedures are utilizable beyond the scope of this dissertation and enable one to sharpen the analysis of dynamic equilibrium models.Tämä väitöskirja käsittelee strategista kaupankäyntiä hyödyntäen sekä analyyttisiä että numeerisia menetelmiä. Strategisen kaupankäynnin mallit, erityisesti optimaalinen kauppojen toteutus ja portfolion valinta, pyrkivät tarkasti huomioimaan kaupankäynnistä itsestään aiheutuvat eksplisiittiset ja implisiittiset kustannukset. Tämä erottaa strategisen kaupankäynnin mallit klassisista kitkattomista malleista. Kustannusten huomioiminen rahoitusmarkkinoiden dynaamisessa tarkastelussa monimutkaistaa malleja. Ensinnäkin kaupankävijöiden tavoitteet muuttuvat hienovaraisemmiksi, koska liian aktiivinen kaupankäynti johtaa korkeisiin kaupankäyntikuluihin ja heikkoon tuottoon. Toiseksi oletus siitä, että kaupankävijöiden valitsemat toimet vaikuttavat hintoihin, johtaa pelikäyttäytymiseen silloin, kun markkinoilla on useampia kaupankävijöitä. Pelikäyttäytymisen huomioiminen on ensiarvoisen tärkeää, mikäli informaatio kaupankävijöiden kesken on asymmetristä. Näiden piirteiden johdosta tässä väitöskirjassa käsitellyt mallit mahdollistavat abstrahoitujen rahoitusmarkkinoiden aiempaa täsmällisemmän tarkastelun esimerkiksi päivänsisäisen kaupankäynnin osalta. Tämän lisäksi mallien avulla voidaan löytää vastauksia uusiin kysymyksiin, kuten esimerkiksi siihen, millaisia ovat kaupankävijöiden keskinäiset vuorovaikutussuhteet dynaamisilla markkinoilla. Monimutkaisten mallien analysointiin hyödynnetään numeerisia menetelmiä. Tämä avaa mahdollisuuden näiden menetelmien yksityiskohtaisempaan tarkasteluun, ja tätä mahdollisuutta hyödynnetään pohtimalla laskennallisia ratkaisuja tuoreesta numeerista reaalista algebrallista geometriaa hyödyntävästä näkökulmasta. Väitöskirjassa esitellyt uudet laskennalliset ratkaisut ovat laajalti hyödynnettävissä, ja niiden avulla on mahdollista terävöittää dynaamisten tasapainomallien analysointia

Operational Research: Methods and Applications

Throughout its history, Operational Research has evolved to include a variety of methods, models and algorithms that have been applied to a diverse and wide range of contexts. This encyclopedic article consists of two main sections: methods and applications. The first aims to summarise the up-to-date knowledge and provide an overview of the state-of-the-art methods and key developments in the various subdomains of the field. The second offers a wide-ranging list of areas where Operational Research has been applied. The article is meant to be read in a nonlinear fashion. It should be used as a point of reference or first-port-of-call for a diverse pool of readers: academics, researchers, students, and practitioners. The entries within the methods and applications sections are presented in alphabetical order. The authors dedicate this paper to the 2023 Turkey/Syria earthquake victims. We sincerely hope that advances in OR will play a role towards minimising the pain and suffering caused by this and future catastrophes