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Title: Dynamic Programming and Trade Execution
Authors: Li, Tianhui
Advisors: Carmona, Rene
Contributors: Operations Research and Financial Engineering Department
Keywords: dynamic control
optimal execution
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.
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

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