An Optimal Execution Problem with Market Impact

We study an optimal execution problem in a continuous-time market model that considers market impact. We formulate the problem as a stochastic control problem and investigate properties of the corresponding value function. We find that right-continuity at the time origin is associated with the strength of market impact for large sales, otherwise the value function is continuous. Moreover, we show the semi-group property (Bellman principle) and characterise the value function as a viscosity solution of the corresponding Hamilton-Jacobi-Bellman equation. We introduce some examples where the forms of the optimal strategies change completely, depending on the amount of the trader's security holdings and where optimal strategies in the Black-Scholes type market with nonlinear market impact are not block liquidation but gradual liquidation, even when the trader is risk-neutral.Comment: 36 pages, 8 figures, a modified version of the article "An optimal execution problem with market impact" in Finance and Stochastics (2014

Explicitly symmetrical treatment of three-body phase space

We derive expressions for three-body phase space that are explicitly symmetrical in the masses of the three particles. We study geometrical properties of the variables involved in elliptic integrals and demonstrate that it is convenient to use the Jacobian zeta function to express the results in four and six dimensions.Comment: 20 pages, latex, 2 postscript figure

Calibration of optimal execution of financial transactions in the presence of transient market impact

Trading large volumes of a financial asset in order driven markets requires the use of algorithmic execution dividing the volume in many transactions in order to minimize costs due to market impact. A proper design of an optimal execution strategy strongly depends on a careful modeling of market impact, i.e. how the price reacts to trades. In this paper we consider a recently introduced market impact model (Bouchaud et al., 2004), which has the property of describing both the volume and the temporal dependence of price change due to trading. We show how this model can be used to describe price impact also in aggregated trade time or in real time. We then solve analytically and calibrate with real data the optimal execution problem both for risk neutral and for risk averse investors and we derive an efficient frontier of optimal execution. When we include spread costs the problem must be solved numerically and we show that the introduction of such costs regularizes the solution.Comment: 31 pages, 8 figure

Theoretical and Numerical Analysis of an Optimal Execution Problem with Uncertain Market Impact

This paper is a continuation of Ishitani and Kato (2015), in which we derived a continuous-time value function corresponding to an optimal execution problem with uncertain market impact as the limit of a discrete-time value function. Here, we investigate some properties of the derived value function. In particular, we show that the function is continuous and has the semigroup property, which is strongly related to the Hamilton-Jacobi-Bellman quasi-variational inequality. Moreover, we show that noise in market impact causes risk-neutral assessment to underestimate the impact cost. We also study typical examples under a log-linear/quadratic market impact function with Gamma-distributed noise.Comment: 24 pages, 14 figures. Continuation of the paper arXiv:1301.648

A New MHD Code with Adaptive Mesh Refinement and Parallelization for Astrophysics

A new code, named MAP, is written in Fortran language for magnetohydrodynamics (MHD) calculation with the adaptive mesh refinement (AMR) and Message Passing Interface (MPI) parallelization. There are several optional numerical schemes for computing the MHD part, namely, modified Mac Cormack Scheme (MMC), Lax-Friedrichs scheme (LF) and weighted essentially non-oscillatory (WENO) scheme. All of them are second order, two-step, component-wise schemes for hyperbolic conservative equations. The total variation diminishing (TVD) limiters and approximate Riemann solvers are also equipped. A high resolution can be achieved by the hierarchical block-structured AMR mesh. We use the extended generalized Lagrange multiplier (EGLM) MHD equations to reduce the non-divergence free error produced by the scheme in the magnetic induction equation. The numerical algorithms for the non-ideal terms, e.g., the resistivity and the thermal conduction, are also equipped in the MAP code. The details of the AMR and MPI algorithms are described in the paper.Comment: 44 pages, 16 figure

Phase-Field Formulation for Quantitative Modeling of Alloy Solidification

A phase-field formulation is introduced to simulate quantitatively microstructural pattern formation in alloys. The thin-interface limit of this formulation yields a much less stringent restriction on the choice of interface thickness than previous formulations and permits to eliminate non-equilibrium effects at the interface. Dendrite growth simulations with vanishing solid diffusivity show that both the interface evolution and the solute profile in the solid are well resolved

Tightness for a stochastic Allen--Cahn equation

We study an Allen-Cahn equation perturbed by a multiplicative stochastic noise which is white in time and correlated in space. Formally this equation approximates a stochastically forced mean curvature flow. We derive uniform energy bounds and prove tightness of of solutions in the sharp interface limit, and show convergence to phase-indicator functions.Comment: 27 pages, final Version to appear in "Stochastic Partial Differential Equations: Analysis and Computations". In Version 4, Proposition 6.3 is new. It replaces and simplifies the old propositions 6.4-6.

Regularity of higher codimension area minimizing integral currents

This lecture notes are an expanded version of the course given at the ERC-School on Geometric Measure Theory and Real Analysis, held in Pisa, September 30th - October 30th 2013. The lectures aim to explain the main steps of a new proof of the partial regularity of area minimizing integer rectifiable currents in higher codimension, due originally to F. Almgren, which is contained in a series of papers in collaboration with C. De Lellis (University of Zurich).Comment: This text will appear in "Geometric Measure Theory and Real Analysis", pp. 131--192, Proceedings of the ERC school in Pisa (2013), L. Ambrosio Ed., Edizioni SNS (CRM Series

Multidimensional Phase Space and Sunset Diagrams

We derive expressions for the phase-space of a particle of momentum $p$ decaying into $N$ particles, that are valid for any number of dimensions. These are the imaginary parts of so-called `sunset' diagrams, which we also obtain. The results are given as a series of hypergeometric functions, which terminate for odd dimensions and are also well-suited for deriving the threshold behaviour.Comment: 12 pages, RevTex. 2 minor algebraic corrections to page 4 after eqns (6) and (8