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The Financial Mathematics of Market Liquidity - from Optimal Execution to Market
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eBay item number:126273251377
Item specifics
- Condition
- Subject
- Mathematics
- ISBN
- 9781498725477
- Publication Name
- Financial Mathematics of Market Liquidity : from Optimal Execution to Market Making
- Item Length
- 9.3in
- Publisher
- CRC Press LLC
- Publication Year
- 2016
- Series
- Chapman and Hall/Crc Financial Mathematics Ser.
- Type
- Textbook
- Format
- Hardcover
- Language
- English
- Item Height
- 0.9in
- Item Width
- 7in
- Item Weight
- 20 Oz
- Number of Pages
- 278 Pages
About this product
Product Information
This book is among the first to present the mathematical models most commonly used to solve optimal execution problems and market making problems in finance. The Financial Mathematics of Market Liquidity: From Optimal Execution to Market Making presents a general modeling framework for optimal execution problems-inspired from the Almgren-Chriss approach-and then demonstrates the use of that framework across a wide range of areas. The book introduces the classical tools of optimal execution and market making, along with their practical use. It also demonstrates how the tools used in the optimal execution literature can be used to solve classical and new issues where accounting for liquidity is important. In particular, it presents cutting-edge research on the pricing of block trades, the pricing and hedging of options when liquidity matters, and the management of complex share buy-back contracts. What sets this book apart from others is that it focuses on specific topics that are rarely, or only briefly, tackled in books dealing with market microstructure. It goes far beyond existing books in terms of mathematical modeling-bridging the gap between optimal execution and other fields of Quantitative Finance. The book includes two appendices dedicated to the mathematical notions used throughout the book. Appendix A recalls classical concepts of mathematical economics. Appendix B recalls classical tools of convex analysis and optimization, along with central ideas and results of the calculus of variations. This self-contained book is accessible to anyone with a minimal background in mathematical analysis, dynamic optimization, and stochastic calculus. Covering post-electronification financial markets and liquidity issues for pricing, this book is an ideal resource to help investment banks and asset managers optimize trading strategies and improve overall risk management.
Product Identifiers
Publisher
CRC Press LLC
ISBN-10
1498725473
ISBN-13
9781498725477
eBay Product ID (ePID)
219204477
Product Key Features
Publication Name
Financial Mathematics of Market Liquidity : from Optimal Execution to Market Making
Format
Hardcover
Language
English
Publication Year
2016
Series
Chapman and Hall/Crc Financial Mathematics Ser.
Type
Textbook
Number of Pages
278 Pages
Dimensions
Item Length
9.3in
Item Height
0.9in
Item Width
7in
Item Weight
20 Oz
Additional Product Features
Series Volume Number
33
Lc Classification Number
Hg106.G84 2016
Reviews
"This is a very timely book that cuts across various fields (applied mathematics, operations research, and quantitative finance). Execution costs due to market illiquidity can significantly reduce returns on investment strategies and, for this reason, affect asset prices. It is therefore important to design trading strategies minimizing these costs and to account for their effect on prices. In the last decade, 'quants' and researchers in quantitative finance have made considerable progress on these issues, integrating in their models changes in the way financial markets work (e.g., the development of continuous limit order books, market fragmentation, dark pools, the automation of trading, etc.). Olivier Guéant's book takes stock of this effort by providing a rigorous and expert presentation of mathematical tools, models, and numerical methods developed in this area. I strongly recommend it for researchers and graduate students interested in how illiquidity costs affect trading strategies and should be accounted for in asset valuation problems." --Thierry Foucault, HEC Foundation Chair Professor of Finance, HEC, Paris "This book is a must-have for quantitative analysts working at algorithmic trading desks. Olivier Guéant could have written a sophisticated book dedicated to cutting-edge research. He rather decided to put his talent at the service of a far more difficult task: deliver a clear view of modern algorithmic trading to strats or quants having decent scientific training. Scientists will find here all the needed keys to control the intraday risk of their trading models, improving their overall efficiency. Covering brokerage algos, market making, hedging, and share buyback techniques, this book is the definitive reference for algo builders. Moreover, Olivier links algorithmic trading with market microstructure during the first chapter of the book, including interesting thoughts on corporate bonds trading. On the other hand, he provides a nice introduction to mathematical economics in the Appendix. This book is resolutely more than a bunch of equations thrown on blank pages. I consider it an important step forward in the building of the mathematics of market microstructure." --Charles-Albert Lehalle, Senior Research Advisor, Capital Fund Management, "This is a very timely book that cuts across various fields (applied mathematics, operations research, and quantitative finance). Execution costs due to market illiquidity can significantly reduce returns on investment strategies and, for this reason, affect asset prices. It is therefore important to design trading strategies minimizing these costs and to account for their effect on prices. In the last decade, 'quants' and researchers in quantitative finance have made considerable progress on these issues, integrating in their models changes in the way financial markets work (e.g., the development of continuous limit order books, market fragmentation, dark pools, the automation of trading, etc.). "Olivier Guéant's book takes stock of this effort by providing a rigorous and expert presentation of mathematical tools, models, and numerical methods developed in this area. I strongly recommend it for researchers and graduate students interested in how illiquidity costs affect trading strategies and should be accounted for in asset valuation problems." --Thierry Foucault, HEC Foundation Chair Professor of Finance, HEC, Paris "This book is a must-have for quantitative analysts working at algorithmic trading desks. Olivier Guéant could have written a sophisticated book dedicated to cutting-edge research. He rather decided to put his talent at the service of a far more difficult task: deliver a clear view of modern algorithmic trading to strats or quants having decent scientific training. Scientists will find here all the needed keys to control the intraday risk of their trading models, improving their overall efficiency. Covering brokerage algorithms, market making, hedging, and share buyback techniques, this book is the definitive reference for algorithm builders. Moreover, Olivier links algorithmic trading with market microstructure during the first chapter of the book, including interesting thoughts on corporate bonds trading. On the other hand, he provides a nice introduction to mathematical economics in the Appendix. This book is resolutely more than a bunch of equations thrown on blank pages. I consider it an important step forward in the building of the mathematics of market microstructure." --Charles-Albert Lehalle, Senior Research Advisor, Capital Fund Management, "This excellent monograph covers the mathematical theory of market microstructure with particular emphasis in models of optimal execution and market making. Gueant's book is a superb introduction to these topics for graduate students in mathematical finance or quants who want to work in execution algorithms or market-making strategies." --Jose A. Scheinkman, Charles and Lynn Zhang Professor of Economics, Columbia University, and Theodore Wells '29 Professor of Economics Emeritus, Princeton University "This is a very timely book that cuts across various fields (applied mathematics, operations research, and quantitative finance). Execution costs due to market illiquidity can significantly reduce returns on investment strategies and, for this reason, affect asset prices. It is therefore important to design trading strategies minimizing these costs and to account for their effect on prices. In the last decade, 'quants' and researchers in quantitative finance have made considerable progress on these issues, integrating in their models changes in the way financial markets work (e.g., the development of continuous limit order books, market fragmentation, dark pools, the automation of trading, etc.). "Olivier Guant's book takes stock of this effort by providing a rigorous and expert presentation of mathematical tools, models, and numerical methods developed in this area. I strongly recommend it for researchers and graduate students interested in how illiquidity costs affect trading strategies and should be accounted for in asset valuation problems." --Thierry Foucault, HEC Foundation Chair Professor of Finance, HEC, Paris "This book is a must-have for quantitative analysts working at algorithmic trading desks. Olivier Guant could have written a sophisticated book dedicated to cutting-edge research. He rather decided to put his talent at the service of a far more difficult task: deliver a clear view of modern algorithmic trading to strats or quants having decent scientific training. Scientists will find here all the needed keys to control the intraday risk of their trading models, improving their overall efficiency. Covering brokerage algorithms, market making, hedging, and share buyback techniques, this book is the definitive reference for algorithm builders. Moreover, Olivier links algorithmic trading with market microstructure during the first chapter of the book, including interesting thoughts on corporate bonds trading. On the other hand, he provides a nice introduction to mathematical economics in the Appendix. This book is resolutely more than a bunch of equations thrown on blank pages. I consider it an important step forward in the building of the mathematics of market microstructure." --Charles-Albert Lehalle, Senior Research Advisor, Capital Fund Management, "This excellent monograph covers the mathematical theory of market microstructure with particular emphasis in models of optimal execution and market making. Gueant's book is a superb introduction to these topics for graduate students in mathematical finance or quants who want to work in execution algorithms or market-making strategies." --Jose A. Scheinkman, Charles and Lynn Zhang Professor of Economics, Columbia University, and Theodore Wells '29 Professor of Economics Emeritus, Princeton University "This is a very timely book that cuts across various fields (applied mathematics, operations research, and quantitative finance). Execution costs due to market illiquidity can significantly reduce returns on investment strategies and, for this reason, affect asset prices. It is therefore important to design trading strategies minimizing these costs and to account for their effect on prices. In the last decade, 'quants' and researchers in quantitative finance have made considerable progress on these issues, integrating in their models changes in the way financial markets work (e.g., the development of continuous limit order books, market fragmentation, dark pools, the automation of trading, etc.). "Olivier Guéant's book takes stock of this effort by providing a rigorous and expert presentation of mathematical tools, models, and numerical methods developed in this area. I strongly recommend it for researchers and graduate students interested in how illiquidity costs affect trading strategies and should be accounted for in asset valuation problems." --Thierry Foucault, HEC Foundation Chair Professor of Finance, HEC, Paris "This book is a must-have for quantitative analysts working at algorithmic trading desks. Olivier Guéant could have written a sophisticated book dedicated to cutting-edge research. He rather decided to put his talent at the service of a far more difficult task: deliver a clear view of modern algorithmic trading to strats or quants having decent scientific training. Scientists will find here all the needed keys to control the intraday risk of their trading models, improving their overall efficiency. Covering brokerage algorithms, market making, hedging, and share buyback techniques, this book is the definitive reference for algorithm builders. Moreover, Olivier links algorithmic trading with market microstructure during the first chapter of the book, including interesting thoughts on corporate bonds trading. On the other hand, he provides a nice introduction to mathematical economics in the Appendix. This book is resolutely more than a bunch of equations thrown on blank pages. I consider it an important step forward in the building of the mathematics of market microstructure." --Charles-Albert Lehalle, Senior Research Advisor, Capital Fund Management
Table of Content
I: INTRODUCTION General Introduction A Brief History of Quantitative Finance Optimal Execution and Market Making in the Extended Market Microstructure Literature Conclusion Organization of Markets Introduction Stock Markets Bond Markets Conclusion II: OPTIMAL LIQUIDATION The Almgren-Chriss Framework Introduction A Generalized Almgren-Chriss Model in Continuous Time The Model in Discrete Time Conclusion Optimal Liquidation with Different Benchmarks Introduction: the Different Types of Orders Target Close Orders POV Orders VWAP Orders Conclusion Extensions of the Almgren-Chriss Framework A More Complex Price Dynamics Adding Participation Constraints Portfolio Liquidation Conclusion Numerical Methods The Case of Single-Stock Portfolios The Case of Multi-Asset Portfolios Conclusion Beyond Almgren-Chriss Overview of the Literature Optimal Execution Models in Practice Conclusion III: LIQUIDITY IN PRICING MODELS Block Trade Pricing Introduction General Definition of Block Trade Prices and Risk-Liquidity Premium The Specific Case of Single-Stock Portfolios A Simpler Case with POV Liquidation Guaranteed VWAP Contracts Conclusion Option Pricing and Hedging with Execution Costs and Market Impact Introduction The Model in Continuous Time The Model in Discrete Time Numerical Examples Conclusion Share Buy-Back Introduction The Model Optimal Management of an ASR Contract Numerical Methods and Examples Conclusion IV: MARKET MAKING Market Making: From Avellaneda-Stoikov to Guéant-Lehalle, and Beyond Introduction The Avellaneda-Stoikov Model Generalization of the Avellaneda-Stoikov Model Market Making on Stock Markets Conclusion Appendices: Mathematical Economics The Expected Utility Theory Utility Functions and Risk Aversion Certainty Equivalent and Indifference Pricing Convex Analysis and Variational Calculus Basic Notions of Convex Analysis Calculus of Variation
Copyright Date
2016
Topic
Finance / General, Probability & Statistics / General, General, Economics / General, Investments & Securities / General
Lccn
2015-046425
Dewey Decimal
332.640151
Intended Audience
College Audience
Dewey Edition
23
Illustrated
Yes
Genre
Business & Economics, Mathematics
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eBay item number:126273251377
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