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Trading strategies within the edges of no-arbitrage

Abstract:

We develop a trading strategy that employs limit and market orders in a multiasset economy where the assets are not only correlated, but can also be structurally dependent. To model the structural dependence, the mid-price processes follow a multivariate reflected Brownian motion on the closure of a no-arbitrage region which is dictated by the bid–ask spreads of the assets. We provide a mathematical framework for such an economy and solve for the value function and optimal control for an inve...

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Publication status:
Published
Peer review status:
Peer reviewed
Version:
Accepted Manuscript

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Publisher copy:
10.1142/S0219024918500255

Authors


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Institution:
University of Oxford
Division:
MPLS Division
Department:
Mathematical Institute
Jaimungal, S More by this author
Publisher:
World Scientific Publishing Publisher's website
Journal:
International Journal of Theoretical and Applied Finance Journal website
Volume:
21
Issue:
3
Pages:
Article: 1850025
Publication date:
2018-05-28
Acceptance date:
2018-04-06
DOI:
EISSN:
1793-6322
ISSN:
0219-0249
Pubs id:
pubs:731983
URN:
uri:fd00acb4-078c-4ada-8847-49c24fca26e7
UUID:
uuid:fd00acb4-078c-4ada-8847-49c24fca26e7
Local pid:
pubs:731983

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