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Conference Paper: Optimal submission problem in a limit order book with VaR constraints

TitleOptimal submission problem in a limit order book with VaR constraints
Authors
KeywordsDiffusion approximation
High-frequency trading
HJB equations
Limit order book
VaR
Issue Date2012
PublisherIEEE Computer Society. The Journal's web site is located at http://ieeexplore.ieee.org/xpl/conhome.jsp?punumber=1002829
Citation
The 5th International Joint Conference on Computational Sciences and Optimization (CSO 2012), Harbin, Heilongjiang Province, China, 23-26 June 2012. In Proceedings of the 5th CSO, 2012, p. 266-270 How to Cite?
AbstractWe consider an optimal selection problem for bid and ask quotes subject to a value-at-Risk (VaR) constraint when arrivals of the buy and sell orders are governed by a Poisson process. The problem is formulated as a constrained utility maximization problem over a finite time horizon. Using a diffusion approximation to Poisson arrivals of market orders, the dynamic programming principle can be applied here. We propose an efficient procedure to solve this constrained utility maximization problem based on a successive approximation algorithm. Numerical examples with and without the VaR constraint are used to illustrate the effect of the risk constraint on the dealer's choices. We also conduct numerical experiments to analyze the impacts of the risk constraint on dealer's terminal profit. © 2012 IEEE.
Persistent Identifierhttp://hdl.handle.net/10722/160279
ISSN

 

DC FieldValueLanguage
dc.contributor.authorSong, Nen_US
dc.contributor.authorChing, WKen_US
dc.contributor.authorSiu, TKen_US
dc.contributor.authorYiu, Cen_US
dc.date.accessioned2012-08-16T06:07:18Z-
dc.date.available2012-08-16T06:07:18Z-
dc.date.issued2012en_US
dc.identifier.citationThe 5th International Joint Conference on Computational Sciences and Optimization (CSO 2012), Harbin, Heilongjiang Province, China, 23-26 June 2012. In Proceedings of the 5th CSO, 2012, p. 266-270en_US
dc.identifier.issn978-0-7695-4690-2 (isbn)-
dc.identifier.urihttp://hdl.handle.net/10722/160279-
dc.description.abstractWe consider an optimal selection problem for bid and ask quotes subject to a value-at-Risk (VaR) constraint when arrivals of the buy and sell orders are governed by a Poisson process. The problem is formulated as a constrained utility maximization problem over a finite time horizon. Using a diffusion approximation to Poisson arrivals of market orders, the dynamic programming principle can be applied here. We propose an efficient procedure to solve this constrained utility maximization problem based on a successive approximation algorithm. Numerical examples with and without the VaR constraint are used to illustrate the effect of the risk constraint on the dealer's choices. We also conduct numerical experiments to analyze the impacts of the risk constraint on dealer's terminal profit. © 2012 IEEE.-
dc.languageengen_US
dc.publisherIEEE Computer Society. The Journal's web site is located at http://ieeexplore.ieee.org/xpl/conhome.jsp?punumber=1002829-
dc.relation.ispartofInternational Joint Conference on Computational Sciences and Optimization Proceedingsen_US
dc.rightsInternational Joint Conference on Computational Sciences and Optimization Proceedings. Copyright © IEEE Computer Society.-
dc.rights©2012 IEEE. Personal use of this material is permitted. However, permission to reprint/republish this material for advertising or promotional purposes or for creating new collective works for resale or redistribution to servers or lists, or to reuse any copyrighted component of this work in other works must be obtained from the IEEE.-
dc.rightsCreative Commons: Attribution 3.0 Hong Kong License-
dc.subjectDiffusion approximation-
dc.subjectHigh-frequency trading-
dc.subjectHJB equations-
dc.subjectLimit order book-
dc.subjectVaR-
dc.titleOptimal submission problem in a limit order book with VaR constraintsen_US
dc.typeConference_Paperen_US
dc.identifier.emailSong, N: songna@HKUSUC.hku.hken_US
dc.identifier.emailChing, WK: wching@hku.hk-
dc.identifier.emailSiu, TK: ktksiu2005@gmail.com-
dc.identifier.emailYiu, C: macyiu@polyu.edu.hk-
dc.identifier.authorityChing, WK=rp00679en_US
dc.description.naturepublished_or_final_version-
dc.identifier.doi10.1109/CSO.2012.66-
dc.identifier.scopuseid_2-s2.0-84867907591-
dc.identifier.hkuros203958en_US
dc.identifier.spage266en_US
dc.identifier.epage270en_US
dc.publisher.placeUnited States-
dc.description.otherThe 5th International Joint Conference on Computational Sciences and Optimization (CSO 2012), Harbin, Heilongjiang Province, China, 23-26 June 2012. In Proceedings of the 5th CSO, 2012, p. 266-270-

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