Equations and Shape of the Optimal Band Strategy
We consider the problem of the optimal trading strategy in the presence of a price predictor, linear trading costs and a quadratic risk control. The solution is known to be a band system, a policy that induces a no-trading zone in the positions space. Using a path-integral method introduced in a pre...
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| creator | de Lataillade, Joachim Chaouki, Ayman |
| description | We consider the problem of the optimal trading strategy in the presence of a
price predictor, linear trading costs and a quadratic risk control. The
solution is known to be a band system, a policy that induces a no-trading zone
in the positions space. Using a path-integral method introduced in a previous
work, we give equations for the upper and lower edges of this band, and solve
them explicitly in the case of an Ornstein-Uhlenbeck predictor. We then explore
the shape of this solution and derive its asymptotic behavior for large values
of the predictor, without requiring trading costs to be small. |
| doi_str_mv | 10.48550/arxiv.2003.04646 |
| format | Article |
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price predictor, linear trading costs and a quadratic risk control. The
solution is known to be a band system, a policy that induces a no-trading zone
in the positions space. Using a path-integral method introduced in a previous
work, we give equations for the upper and lower edges of this band, and solve
them explicitly in the case of an Ornstein-Uhlenbeck predictor. We then explore
the shape of this solution and derive its asymptotic behavior for large values
of the predictor, without requiring trading costs to be small.</description><identifier>DOI: 10.48550/arxiv.2003.04646</identifier><language>eng</language><subject>Quantitative Finance - Mathematical Finance</subject><creationdate>2020-03</creationdate><rights>http://arxiv.org/licenses/nonexclusive-distrib/1.0</rights><oa>free_for_read</oa><woscitedreferencessubscribed>false</woscitedreferencessubscribed></display><links><openurl>$$Topenurl_article</openurl><openurlfulltext>$$Topenurlfull_article</openurlfulltext><thumbnail>$$Tsyndetics_thumb_exl</thumbnail><link.rule.ids>228,230,776,881</link.rule.ids><linktorsrc>$$Uhttps://arxiv.org/abs/2003.04646$$EView_record_in_Cornell_University$$FView_record_in_$$GCornell_University$$Hfree_for_read</linktorsrc><backlink>$$Uhttps://doi.org/10.48550/arXiv.2003.04646$$DView paper in arXiv$$Hfree_for_read</backlink></links><search><creatorcontrib>de Lataillade, Joachim</creatorcontrib><creatorcontrib>Chaouki, Ayman</creatorcontrib><title>Equations and Shape of the Optimal Band Strategy</title><description>We consider the problem of the optimal trading strategy in the presence of a
price predictor, linear trading costs and a quadratic risk control. The
solution is known to be a band system, a policy that induces a no-trading zone
in the positions space. Using a path-integral method introduced in a previous
work, we give equations for the upper and lower edges of this band, and solve
them explicitly in the case of an Ornstein-Uhlenbeck predictor. We then explore
the shape of this solution and derive its asymptotic behavior for large values
of the predictor, without requiring trading costs to be small.</description><subject>Quantitative Finance - Mathematical Finance</subject><fulltext>true</fulltext><rsrctype>article</rsrctype><creationdate>2020</creationdate><recordtype>article</recordtype><sourceid>GOX</sourceid><recordid>eNotzrtuwkAQheFtKBDwAFTsC9gZ23stAUGChEQBvTXYM2DJGGM2CN4-wUl1il86-oSYJhArpzV8YPesHnEKkMWgjDJDAavbN4bq2twlNqXcn7EleWUZziR3baguWMtFX0KHgU6vsRgw1nea_O9IHNarw_Ir2u4-N8v5NkJjTVSAsR6YHGNhkHTiMqVTSo7srC1TTFTqLDssSqtBkQFNhS8NK-3Zk-dsJGZ_tz05b7tfSffK3_S8p2c_0oU9dQ</recordid><startdate>20200310</startdate><enddate>20200310</enddate><creator>de Lataillade, Joachim</creator><creator>Chaouki, Ayman</creator><scope>GOX</scope></search><sort><creationdate>20200310</creationdate><title>Equations and Shape of the Optimal Band Strategy</title><author>de Lataillade, Joachim ; Chaouki, Ayman</author></sort><facets><frbrtype>5</frbrtype><frbrgroupid>cdi_FETCH-LOGICAL-a676-c06790fe8fac6ae5183452e1bf877d2a14287f8acd7504e605ec9d6f459f9e9f3</frbrgroupid><rsrctype>articles</rsrctype><prefilter>articles</prefilter><language>eng</language><creationdate>2020</creationdate><topic>Quantitative Finance - Mathematical Finance</topic><toplevel>online_resources</toplevel><creatorcontrib>de Lataillade, Joachim</creatorcontrib><creatorcontrib>Chaouki, Ayman</creatorcontrib><collection>arXiv.org</collection></facets><delivery><delcategory>Remote Search Resource</delcategory><fulltext>fulltext_linktorsrc</fulltext></delivery><addata><au>de Lataillade, Joachim</au><au>Chaouki, Ayman</au><format>journal</format><genre>article</genre><ristype>JOUR</ristype><atitle>Equations and Shape of the Optimal Band Strategy</atitle><date>2020-03-10</date><risdate>2020</risdate><abstract>We consider the problem of the optimal trading strategy in the presence of a
price predictor, linear trading costs and a quadratic risk control. The
solution is known to be a band system, a policy that induces a no-trading zone
in the positions space. Using a path-integral method introduced in a previous
work, we give equations for the upper and lower edges of this band, and solve
them explicitly in the case of an Ornstein-Uhlenbeck predictor. We then explore
the shape of this solution and derive its asymptotic behavior for large values
of the predictor, without requiring trading costs to be small.</abstract><doi>10.48550/arxiv.2003.04646</doi><oa>free_for_read</oa></addata></record> |
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| subjects | Quantitative Finance - Mathematical Finance |
| title | Equations and Shape of the Optimal Band Strategy |
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