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Optimal trading with online parameters revisions

Authors
  • Baradel, N
  • Bouchard, B
  • Dang, Ngoc Minh
Publication Date
Jan 01, 2016
Source
HAL-UPMC
Keywords
Language
English
License
Unknown
External links

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 by 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.

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