401-3910-13L  Illiquid Markets

SemesterSpring Semester 2013
LecturersJ. Muhle-Karbe
Periodicitynon-recurring course
Language of instructionEnglish



Courses

NumberTitleHoursLecturers
401-3910-13 SIlliquid Markets
The seminar is fully booked.
2 hrs
Wed15:15-17:00HG D 5.2 »
J. Muhle-Karbe

Catalogue data

AbstractClassical financial theory is built on "perfectly liquid" markets, where orders of arbitrary size can be executed at the market price. This is a sensible for small investors. For large traders, however, the price impact caused by their orders constitutes a major risk factor. In this seminar, we will look a various price impact models, and discuss how optimal trading strategies should be adjusted.
Objectivea) Learn to work through a research article and present it in a scientific talk.
b) Digest the underlying mathematics.
c) Develop the corresponding economic intuition.
ContentOverview over recent developments in:
a) price impact modeling
b) stochastic optimization problems for large traders, such as unwinding a large position, portfolio rebalancing, or option hedging
Lecture notesNot available.

The seminar will be based on original research articles.
LiteratureTopics will be assigned taking into account the participants' interests and prerequisites. Some references include:

Obizhaeva and Wang (2005). Optimal trading strategy and supply/demand dynamics. Available online at Link

Almgren and Chriss (2000). Optimal execution of portfolio transactions. Available online at
Link

Schied and Schöneborn (2009). Risk aversion and the dynamics of optimal liquidation strategies in illiquid markets.
Available online at
Link

Collin-Dufresne, Daniel, Moallemi, and Saglam (2012). Strategic asset allocation in the presence of transaction costs. Available online at Link
Prerequisites / NoticeStrongly recommended: Foundations for Mathematical Finance, solid knowledge of Ito calculus.

The seminar will be run jointly by Johannes Muhle-Karbe and Ludovic Moreau. We welcome early registration (email to Link).

Performance assessment

Performance assessment information (valid until the course unit is held again)
Performance assessment as a semester course
ECTS credits4 credits
ExaminersJ. Muhle-Karbe
Typeungraded semester performance
Language of examinationEnglish
RepetitionRepetition only possible after re-enrolling for the course unit.

Learning materials

No public learning materials available.
Only public learning materials are listed.

Groups

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Restrictions

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Offered in

ProgrammeSectionType
Mathematics MasterSeminarsWInformation