Optimal Trading with Online Parameter Revisions

N. Baradel, Bruno Bouchard () and N. m. Dang
Additional contact information
N. Baradel: CREST - Centre de Recherche en Economie et Statistique [Bruz] - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz], CEREMADE - CEntre de REcherches en MAthématiques de la DEcision - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique
Bruno Bouchard: CEREMADE - CEntre de REcherches en MAthématiques de la DEcision - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique
N. m. Dang: UNS-HCMC - University of Natural Science, Vietnam National University HoChiMinhCity - University of Natural Science, HoChiMinhCity

Post-Print from HAL

Abstract: The aim of this paper is to explain how parameters adjustments can be integrated in the design or the control of automates of trading. Typically, we are interested in the online estimation of the market impacts generated by robots or single orders, and how they/the controller should react in an optimal way to the informations generated by the observation of the realized impacts. This can be formulated as an optimal impulse control problem with unknown parameters, on which a prior is given. We explain how a mix of the classical Bayesian updating rule and of optimal control techniques allows one to derive the dynamic programming equation satisfied by the corresponding value function, from which the optimal policy can be inferred. We provide an example of convergent finite difference scheme and consider typical examples of applications.

Keywords: Optimal trading; market impact; uncertainty; Bayesian filtering (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-sea
Note: View the original document on HAL open archive server: https://hal.science/hal-01590602v1
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Published in Market microstructure and liquidity, 2016, 02 (03n04), pp.1750003. ⟨10.1142/S2382626617500034⟩

Downloads: (external link)
https://hal.science/hal-01590602v1/document (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01590602

DOI: 10.1142/S2382626617500034

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().