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Speculative trading, prospect theory and transaction costs 投机交易、前景理论与交易成本
IF 1.7 2区 经济学
Finance and Stochastics Pub Date : 2022-12-15 DOI: 10.1007/s00780-022-00494-7
Alex S. L. Tse, Harry Zheng
{"title":"Speculative trading, prospect theory and transaction costs","authors":"Alex S. L. Tse, Harry Zheng","doi":"10.1007/s00780-022-00494-7","DOIUrl":"https://doi.org/10.1007/s00780-022-00494-7","url":null,"abstract":"<p>A speculative agent with prospect theory preference chooses the optimal time to purchase and then to sell an indivisible risky asset to maximise the expected utility of the round-trip profit net of transaction costs. The optimisation problem is formulated as a sequential optimal stopping problem, and we provide a complete characterisation of the solution. Depending on the preference and market parameters, the optimal strategy can be “buy and hold”, “buy low, sell high”, “buy high, sell higher” or “no trading”. Behavioural preference and market friction interact in a subtle way which yields surprising implications on the agent’s trading patterns. For example, increasing the market entry fee does not necessarily curb speculative trading, but instead may induce a higher reference point under which the agent becomes more risk-seeking and in turn is more likely to trade.</p>","PeriodicalId":50447,"journal":{"name":"Finance and Stochastics","volume":"230 5","pages":""},"PeriodicalIF":1.7,"publicationDate":"2022-12-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"138508639","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
Optimal execution with stochastic delay 具有随机延迟的最优执行
IF 1.7 2区 经济学
Finance and Stochastics Pub Date : 2022-12-01 DOI: 10.1007/s00780-022-00491-w
Álvaro Cartea, Leandro Sánchez-Betancourt
{"title":"Optimal execution with stochastic delay","authors":"Álvaro Cartea, Leandro Sánchez-Betancourt","doi":"10.1007/s00780-022-00491-w","DOIUrl":"https://doi.org/10.1007/s00780-022-00491-w","url":null,"abstract":"<p>We show how traders use marketable limit orders (MLOs) to liquidate a position over a trading window when there is latency in the marketplace. MLOs are liquidity-taking orders that specify a price limit and are for immediate execution only; however, if the price limit of the MLO precludes it from being filled, the exchange cancels the order. We frame our model as an impulse control problem with stochastic latency where the trader controls the times and the price limits of the MLOs sent to the exchange. We show that impatient liquidity takers submit MLOs that may walk the book (capped by the limit price) to increase the probability of filling the trades. On the other hand, patient liquidity takers use speculative MLOs that are only filled if there has been an advantageous move in prices over the latency period. Patient traders who are fast do not use their speed to hit the quotes they observe, or to finish the execution programme early; they use speed to complete the execution programme with as many speculative MLOs as possible. We use foreign exchange data to implement the random-latency-optimal strategy and to compare it with four benchmarks. For patient traders, the random-latency-optimal strategy outperforms the benchmarks by an amount that is greater than the transaction costs paid by liquidity takers in foreign exchange markets. Around news announcements, the value of the outperformance is between two and ten times the value of the transaction costs. The superiority of the strategy is due to both the speculative MLOs that are filled and the price protection of the MLOs.</p>","PeriodicalId":50447,"journal":{"name":"Finance and Stochastics","volume":"90 3","pages":""},"PeriodicalIF":1.7,"publicationDate":"2022-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"138508724","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
Hedging portfolio for a market model of degenerate diffusions 简并扩散市场模型下的对冲投资组合
IF 1.7 2区 经济学
Finance and Stochastics Pub Date : 2022-11-30 DOI: 10.1080/17442508.2022.2150082
M. Çağlar, I. Demirel, A. Üstünel
{"title":"Hedging portfolio for a market model of degenerate diffusions","authors":"M. Çağlar, I. Demirel, A. Üstünel","doi":"10.1080/17442508.2022.2150082","DOIUrl":"https://doi.org/10.1080/17442508.2022.2150082","url":null,"abstract":"We consider a semimartingale market model when the underlying diffusion has a singular volatility matrix and compute the hedging portfolio for a given payoff function. Recently, the representation problem for such degenerate diffusions as a stochastic integral with respect to a martingale has been completely settled. This representation and Malliavin calculus established further for the functionals of a degenerate diffusion process constitute the basis of the present work. Using the Clark–Hausmann–Bismut–Ocone type representation formula derived for these functionals, we prove a version of this formula under an equivalent martingale measure. This allows us to derive the hedging portfolio as a solution of a system of linear equations. The uniqueness of the solution is achieved by a projection idea that lies at the core of the martingale representation at the first place. We demonstrate the hedging strategy as explicitly as possible with some examples of the payoff function such as those used in exotic options, whose value at maturity depends on the prices over the entire time horizon.","PeriodicalId":50447,"journal":{"name":"Finance and Stochastics","volume":"62 1","pages":"1022 - 1041"},"PeriodicalIF":1.7,"publicationDate":"2022-11-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"86646349","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
Asymptotic behaviour of solutions to stochastic three-dimensional globally modified Navier–Stokes equations 随机三维全局修正Navier-Stokes方程解的渐近行为
IF 1.7 2区 经济学
Finance and Stochastics Pub Date : 2022-11-27 DOI: 10.1080/17442508.2022.2147005
C. T. Anh, N. Thanh, Phan Thi Hong Tuyet
{"title":"Asymptotic behaviour of solutions to stochastic three-dimensional globally modified Navier–Stokes equations","authors":"C. T. Anh, N. Thanh, Phan Thi Hong Tuyet","doi":"10.1080/17442508.2022.2147005","DOIUrl":"https://doi.org/10.1080/17442508.2022.2147005","url":null,"abstract":"We consider 3D stochastic globally modified Navier–Stokes equations in bounded domains with homogeneous Dirichlet boundary conditions and infinite dimensional Wiener process. We study stability properties of stationary solutions. We also show that one can stabilize an unstable stationary solution by using a multiplicative Itô noise of sufficient intensity or a linear internal feedback controller with support large enough.","PeriodicalId":50447,"journal":{"name":"Finance and Stochastics","volume":"90 7 1","pages":"997 - 1021"},"PeriodicalIF":1.7,"publicationDate":"2022-11-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"72511350","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 1
Complete moment convergence for maximum of randomly weighted sums of martingale difference sequences 鞅差分序列随机加权和最大值的完全矩收敛性
IF 1.7 2区 经济学
Finance and Stochastics Pub Date : 2022-11-17 DOI: 10.1080/17442508.2022.2147006
Zong-feng Qi, Jinyu Zhou, Jigao Yan
{"title":"Complete moment convergence for maximum of randomly weighted sums of martingale difference sequences","authors":"Zong-feng Qi, Jinyu Zhou, Jigao Yan","doi":"10.1080/17442508.2022.2147006","DOIUrl":"https://doi.org/10.1080/17442508.2022.2147006","url":null,"abstract":"In this paper, complete moment convergence for maximum of randomly weighted sums and complete convergence for randomly indexed sums of martingale difference sequences (MDS) are investigated under some proper and sufficient conditions. A Marcinkiewicz–Zygmund type strong law of large numbers (MZSLLN) for MDS is obtained. In addition, relationships among weights, weight functions and boundary functions are revealed in a sense. The results obtained in the paper generalize some corresponding ones for independent and some dependent random variables. As an application, strong consistency for estimators in a nonparametric regression model is established.","PeriodicalId":50447,"journal":{"name":"Finance and Stochastics","volume":"73 1","pages":"941 - 961"},"PeriodicalIF":1.7,"publicationDate":"2022-11-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"86389845","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 1
Generalized weighted number operators on functionals of discrete-time normal martingales 离散时间正规鞅泛函上的广义加权数算子
IF 1.7 2区 经济学
Finance and Stochastics Pub Date : 2022-11-17 DOI: 10.1080/17442508.2022.2150083
Jing Zhang, Caishi Wang, Lixia Zhang, Lu-Gang Zhang
{"title":"Generalized weighted number operators on functionals of discrete-time normal martingales","authors":"Jing Zhang, Caishi Wang, Lixia Zhang, Lu-Gang Zhang","doi":"10.1080/17442508.2022.2150083","DOIUrl":"https://doi.org/10.1080/17442508.2022.2150083","url":null,"abstract":"Let M be a discrete-time normal martingale that has the chaotic representation property. Then, from the space of square integrable functionals of M, one can construct generalized functionals of M. In this paper, by using a type of weights, we introduce a class of continuous linear operators acting on generalized functionals of M, which we call generalized weighted number (GWN) operators. We prove that GWN operators can be represented in terms of generalized annihilation and creation operators (acting on generalized functionals of M). We also examine commutation relations between a GWN operator and a generalized annihilation (or creation) operator, and obtain several formulas expressing such commutation relations.","PeriodicalId":50447,"journal":{"name":"Finance and Stochastics","volume":"219 1","pages":"1078 - 1100"},"PeriodicalIF":1.7,"publicationDate":"2022-11-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"79802434","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
Optimal dividend and risk control strategies for an insurer with two groups of reinsurers 两组再保险公司的最优股利及风险控制策略
IF 1.7 2区 经济学
Finance and Stochastics Pub Date : 2022-09-26 DOI: 10.1080/17442508.2022.2124114
Dingjun Yao, Rui Xu, Gong Cheng, K. Fan
{"title":"Optimal dividend and risk control strategies for an insurer with two groups of reinsurers","authors":"Dingjun Yao, Rui Xu, Gong Cheng, K. Fan","doi":"10.1080/17442508.2022.2124114","DOIUrl":"https://doi.org/10.1080/17442508.2022.2124114","url":null,"abstract":"ABSTRACT This paper assumes that an insurer can control the dividend, reinsurance and refinancing strategies dynamically, and needs to bear proportional and fixed transaction costs. Different from previous literature, we assume that the insurer can buy reinsurance from two groups of reinsurers, i.e. the first group consists of m reinsurers and the second group consists of n reinsurers. The two groups of reinsurers have different risk attitudes and use the variance premium principle and the exponential premium principle in pricing, respectively. By using the optimal control methods, we obtain the optimal joint strategies for maximizing the insurance company's value. The results prove that dividends should be paid according to the impulse strategy; refinancing should be considered if and only if the transaction costs are not too high and the surplus is null; the insurer should diversify risks to all reinsurers in the market simultaneously when the surplus is not too large. The proportion of risk ceded to each reinsurer depends on its quoted price. Finally, numerical examples and economic interpretations are provided to make illustrations.","PeriodicalId":50447,"journal":{"name":"Finance and Stochastics","volume":"10 1","pages":"785 - 818"},"PeriodicalIF":1.7,"publicationDate":"2022-09-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"74960221","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
Small-time expansion for the density of a planar (quadratic) Langevin diffusion 平面(二次)朗之万扩散密度的小时间展开
IF 1.7 2区 经济学
Finance and Stochastics Pub Date : 2022-09-22 DOI: 10.1080/17442508.2022.2113789
J. Franchi
{"title":"Small-time expansion for the density of a planar (quadratic) Langevin diffusion","authors":"J. Franchi","doi":"10.1080/17442508.2022.2113789","DOIUrl":"https://doi.org/10.1080/17442508.2022.2113789","url":null,"abstract":"ABSTRACT The unscaled small-time asymptotics of the density is approached by means of the Brownian bridge, regarding planar analogues of the Langevin diffusion, which are strictly hypoelliptic. While the non-quadratic case remains open, in the quadratic case a new precision is derived.","PeriodicalId":50447,"journal":{"name":"Finance and Stochastics","volume":"33 1","pages":"696 - 748"},"PeriodicalIF":1.7,"publicationDate":"2022-09-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"73770531","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
A concept of copula robustness and its applications in quantitative risk management copula稳健性的概念及其在定量风险管理中的应用
IF 1.7 2区 经济学
Finance and Stochastics Pub Date : 2022-09-13 DOI: 10.1007/s00780-022-00485-8
Henryk Zähle
{"title":"A concept of copula robustness and its applications in quantitative risk management","authors":"Henryk Zähle","doi":"10.1007/s00780-022-00485-8","DOIUrl":"https://doi.org/10.1007/s00780-022-00485-8","url":null,"abstract":"","PeriodicalId":50447,"journal":{"name":"Finance and Stochastics","volume":"26 1","pages":"825 - 875"},"PeriodicalIF":1.7,"publicationDate":"2022-09-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49308354","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 1
On ruin probabilities with investments in a risky asset with a regime-switching price 关于投资于具有制度转换价格的风险资产的破产概率
IF 1.7 2区 经济学
Finance and Stochastics Pub Date : 2022-09-05 DOI: 10.1007/s00780-022-00483-w
Y. Kabanov, S. Pergamenshchikov
{"title":"On ruin probabilities with investments in a risky asset with a regime-switching price","authors":"Y. Kabanov, S. Pergamenshchikov","doi":"10.1007/s00780-022-00483-w","DOIUrl":"https://doi.org/10.1007/s00780-022-00483-w","url":null,"abstract":"","PeriodicalId":50447,"journal":{"name":"Finance and Stochastics","volume":"259 1-2","pages":"877 - 897"},"PeriodicalIF":1.7,"publicationDate":"2022-09-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41305730","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 3
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