5,434 research outputs found
A convex duality method for optimal liquidation with participation constraints
In spite of the growing consideration for optimal execution in the financial
mathematics literature, numerical approximations of optimal trading curves are
almost never discussed. In this article, we present a numerical method to
approximate the optimal strategy of a trader willing to unwind a large
portfolio. The method we propose is very general as it can be applied to
multi-asset portfolios with any form of execution costs, including a bid-ask
spread component, even when participation constraints are imposed. Our method,
based on convex duality, only requires Hamiltonian functions to have
regularity while classical methods require additional regularity and cannot be
applied to all cases found in practice
The behavior of dealers and clients on the European corporate bond market: the case of Multi-Dealer-to-Client platforms
For the last two decades, most financial markets have undergone an evolution
toward electronification. The market for corporate bonds is one of the last
major financial markets to follow this unavoidable path. Traditionally
quote-driven i.e., dealer-driven) rather than order-driven, the market for
corporate bonds is still mainly dominated by voice trading, but a lot of
electronic platforms have emerged. These electronic platforms make it possible
for buy-side agents to simultaneously request several dealers for quotes, or
even directly trade with other buy-siders. The research presented in this
article is based on a large proprietary database of requests for quotes (RFQ)
sent, through the multi-dealer-to-client (MD2C) platform operated by Bloomberg
Fixed Income Trading, to one of the major liquidity providers in European
corporate bonds. Our goal is (i) to model the RFQ process on these platforms
and the resulting competition between dealers, and (ii) to use our model in
order to implicit from the RFQ database the behavior of both dealers and
clients on MD2C platforms
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