Dearth of bond liquidity forces some traders to offload positions – but, as ever, others are waiting to pounce
This paper demonstrates that risk-averse traders can benefit from delaying trades using a model that accounts for volume uncertainty.
A novel optimal execution approach via continuous-time stochastic processes is introduced
A methodology to derive liquidation costs and times in OTC markets is proposed
This paper presents several algorithms based on machine learning to solve hedging problems in incomplete markets.
TCA methodologies that ignore partial fills “might be off by 20% to 30%”
The opportunity cost associated with the cancelled portion of an order is quantified
This paper employs a PDE approach to price several volatility derivatives under different transaction costs and illiquidity models.
New valuation adjustment may lead to more efficient management of derivatives books
Barclays quant proposes methodology for factoring hedging costs into derivatives valuations
Transaction costs’ impact on hedging can now be quantified
A measure for crowding in trades is derived from supply and demand imbalances
Risk Live: At some banks, 70% of spot is now traded via bilateral feeds
Risk Live: Repo with buy side should incur different leverage ratio, suggests big asset manager
Funds are embracing stress-testing, and swing pricing, after “a real liquidity crisis” in March
Deutsche argues for smaller, stronger panels; Citi offers better prices for 'full amount' trades
We present an approach for pricing European call options in the presence of proportional transaction costs, when the stock price follows a general exponential Lévy process.
UK and EU investors may be forced to trade dozens of shares on less liquid exchanges, analysis shows
In this paper, the authors investigate a nonlinear generalization of the Black–Scholes equation for pricing American-style call options, where the volatility term may depend on both the underlying asset price and the Gamma of the option.
Money managers and institutional investors are re-evaluating investment strategies in the face of rapidly shifting market conditions. Consequently, selective genres of exchange-traded funds (ETFs) are seeing robust growth in assets. Hong Kong Exchanges…
Quants are embracing the idea of ‘model free’ pricing and hedging
Quant says a new machine learning technique could change the way banks hedge derivatives
The latest online early paper in our special issue on blockchain enabled energy markets