Price Impact on Term Structure

Brigo, Damiano; Graceffa, Federico; Neuman, Eyal

doi:10.48550/arxiv.2011.10113

2020

DOI: 10.48550/arxiv.2011.10113

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Price Impact on Term Structure

Damiano Brigo¹,

Federico Graceffa²,

Eyal Neuman³

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2022

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“…The following non-convolution kernel was used in order to model price impact in bonds trading (see Section 3.1 of Brigo et al [14]):…”

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confidence: 99%

Optimal Liquidation with Signals: the General Propagator Case

Jaber¹,

Neuman²

2022

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We consider a class of optimal liquidation problems where the agent's transactions create transient price impact driven by a Volterra-type propagator along with temporary price impact. We formulate these problems as minimization of a revenue-risk functionals, where the agent also exploits available information on a progressively measurable price predicting signal. By using an infinite dimensional stochastic control approach, we characterize the value function in terms of a solution to a free-boundary L 2 -valued backward stochastic differential equation and an operator-valued Riccati equation. We then derive analytic solutions to these equations which yields an explicit expression for the optimal trading strategy. We show that our formulas can be implemented in a straightforward and efficient way for a large class of price impact kernels with possible singularities such as the power-law kernel.

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“…The following non-convolution kernel was used in order to model price impact in bonds trading (see Section 3.1 of Brigo et al [14]):…”

mentioning

confidence: 99%

Optimal Liquidation with Signals: the General Propagator Case

Jaber¹,

Neuman²

2022

Preprint

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Price Impact on Term Structure

Cited by 1 publication

References 0 publications

Optimal Liquidation with Signals: the General Propagator Case

Optimal Liquidation with Signals: the General Propagator Case

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