On Regularized Optimal Execution Problems and Their Singular Limits

Trading volume changes based on market microstructure will impact asset prices, which will lead to transaction price changes. Based on the extended Hasbrouck–Foster–Viswanathan (HFV) model, we study the statistical characteristics of daily permanent price impact and daily temporary price impact using high-frequency data from Chinese Stock Markets. We estimate this model using tick-by-tick data for 16 selected stocks that are traded on the Shanghai Stock Exchange. We find the following: (1) the time series of both the permanent price impact and temporary price impact exist in stationarity and long-term memory; (2) there is a strong correlation between the permanent price impact among assets, while the correlation coefficient of the temporary price impact is generally weak; (3) the time interval has no significant influence on the trade volume and the price change at the tick frequency, which means that it is not necessary to take into account the time interval between adjacent transaction in high-frequency trading; and (4) the bid-ask spread is an effective factor to explain trading price change, but has no significant impact on trade volume.

Optimal Portfolio Liquidation with Distress Risk

How should an investor unwind a portfolio in the face of recurring and uncertain liquidity needs? We propose a model of portfolio liquidation in two periods to investigate this question, initially posed by Myron Scholes following the fall of Long Term Capital Management. We show that when the expectation of future liquidity needs is low, the optimal solution involves selling assets that have low permanent and temporary price impacts of trading. However, when there is a high probability of a large future liquidity need, the optimal solution involves retaining assets that have a small temporary impact of trading. In the face of potential future adversity, there is a high option-value to the temporary component of liquidity. The permanent component of liquidity does not share this feature, so that investors will prefer to sell assets with a low ratio of permanent to temporary price impact in the early stages of a crisis, and to hold on to assets with a high ratio of permanent to temporary price impact to protect themselves against an aggravation of the crisis.

A utility maximization problem in an illiquid market is studied. The financial market is assumed to have temporary price impact with finite resilience. After the formulation of this problem as a Markovian stochastic optimal control problem a dynamic programming approach is used for its analysis. In particular, the dynamic programming principle is proved and the value function is shown to be the unique discontinuous viscosity solution. This characterization is utilized to obtain numerical results for the optimal strategy and the loss due to illiquidity.

Smooth Trading with Overconfidence and Market Power

Dynamic trading with Markov liquidity switching

Executing a basket of co‐integrated assets is an important task facing investors. Here, we show how to do this accounting for the informational advantage gained from assets within and outside the basket, as well as for the permanent price impact of market orders (MOs) from all market participants, and the temporary impact that the agent's MOs have on prices. The execution problem is posed as an optimal stochastic control problem and we demonstrate that, under some mild conditions, the value function admits a closed‐form solution, and prove a verification theorem. Furthermore, we use data of five stocks traded in the Nasdaq exchange to estimate the model parameters and use simulations to illustrate the performance of the strategy. As an example, the agent liquidates a portfolio consisting of shares in Intel Corporation and Market Vectors Semiconductor ETF. We show that including the information provided by three additional assets (FARO Technologies, NetApp, Oracle Corporation) considerably improves the strategy's performance; for the portfolio we execute, it outperforms the multiasset version of Almgren–Chriss by approximately 4–4.5 basis points.

In this paper, we investigate the optimal dividend problem under Parisian ruin with affine penalty payments at Parisian ruin time. The underlying risk process is assumed to be a spectrally negative Levy risk process. With the help of the dynamic programming principle, we prove that the value function associated to our optimal control problem is the smallest solution with certain characteristics to the corresponding Hamilton–Jacobi–Bellman (HJB) equation. In addition, the form of the performance function under barrier dividend strategy is expressed in terms of various extended scale functions. Then we identify a condition under which the performance function under certain barrier strategy is also a solution to the HJB equation, which in turn illustrates the optimalilty of such barrier dividend strategy among all admissible strategies. Various numerical examples are also given when the underlying risk process is compound Poisson process, Brownian motion with drift and jump-diffusion process.

Traditionally, call centers have experienced high voluntary turnover rates among their agents (i.e., Customer Service and Sales Representatives). This continues to be an unresolved issue. This paper presents a research study that was conducted to gain a better understanding of the reasons behind employees’ decisions to leave a Customer Service and Sales organization belonging to a large multinational company in Financial Services in the USA. The company’s call centers have consistently experienced a high turnover rate among its agents. This qualitative study was conducted with former employees across three markets to understand the “turning points” which led them to decrease their commitment to the organization and subsequently leave their job. This research aims to enhance our comprehension of the sequential decision-making process that culminates in an employee’s decision to resign. The key findings and recommendations from this study could be used to create targeted organizational development initiatives designed to improve employee retention.

For spectrally negative Lévy risk processes we consider a general version of de Finetti's optimal dividend problem in which the ruin time is replaced with a general drawdown time from the running maximum in its value function. We identify a condition under which a barrier dividend strategy is optimal among all admissible strategies if the underlying process does not belong to a small class of compound Poisson processes with drift, for which the take-the-money-and-run dividend strategy is optimal. It generalizes the previous results on dividend optimization from ruin time based to drawdown time based. The associated drawdown functions are discussed in detail for examples of spectrally negative Lévy processes.

This paper considers the risk sensitive optimal execution problem. In the financial market, trading(buying or selling) of large amount of assets usually causes moving of the price to unfavorable direction and further generates additional trading cost. The optimal execution problem is seeking the best execution strategy(control) in a given horizon to trade(buy or sell) certain amount of asset in order to maximize the profit. In this work, instead of considering the sole objective of maximizing the expected profit, we consider the risk sensitive formulation of such a problem, in which the execution risk is combined implicitly. By using the stochastic control approach, the analytical optimal execution strategy is derived. Using different risk sensitive parameter, our model could generate different mean-variance efficient execution strategy, which provides the investor freedom to adjust the execution strategy. Comparing with the traditional risk neutral formulation, our model shows prominent feature in controlling the execution risk.

Background: The nursing work environment is complex with many variables affecting the nurses' perception and work satisfaction. The strongest predictor of nurse's job dissatisfac-tion and intent to leave a job is personal stress related to the practice environment. Negative work environments demoralize nurses and contribute to the development of unsafe working conditions, which are unhealthy and highly associated with nursing job dissatisfaction, low productivity, and high turnover. High nurse turnover in healthcare facilities can negatively affect the ability of hospitals to meet patient needs, provide quality care and increases both direct and indirect labor costs. Aim of Study: To explore the impact of nursing staff perception of work environment on turnover rate in hemodi-alysis unit. Subjects and Methods: A descriptive correlational design was utilized to collect data from A convince sample of nursing staff working in the selected unit (hemodialysis unit) during the time of data collection (from May to September 2017) at a governmental University hospital. Data was collected by using two tools: The Practice Environment Scale-Nursing Work Index (PES-NWI) questionnaire and turnover rate sheet. Results: There were no significant relation between nursing staff perception of work environment and educational level, there were a high positive relation between nurses perception of work environment and years of experience and there were dramatically increase of turnover rate over the years. Conclusion: Poor nurse work environment is the under-lying factor of nursing turnover. Recommendation: Improving nurse work environment should be emphasized through policy to retain nurses in the workforce; Further research is needed to investigate the tools, guidelines and interventions used by managers in the nursing field to create healthy and welcoming working conditions.

Optimal Order Execution Problem in the Framework of High-Frequency Trading – Sample Model

The problem of order execution is cast as a relative entropy-regularized robust optimal control problem in this article. The order execution agent's goal is to maximize an objective functional associated with his profit-and-loss of trading and simultaneously minimize the inventory risk associated with market's liquidity and uncertainty. We model the market's liquidity and uncertainty by the principle of least relative entropy associated with the market trading rate. The problem of order execution is made into a relative entropy-regularized stochastic differential game. Standard argument of dynamic programming yields that the value function of the differential game satisfies a relative entropy-regularized Hamilton–Jacobi–Isaacs (rHJI) equation. Under the assumptions of linear-quadratic model with Gaussian prior, the rHJI equation reduces to a system of Riccati and linear differential equations. Further imposing constancy of the corresponding coefficients, the system of differential equations can be solved in closed form, resulting in analytical expressions for optimal strategy and trajectory as well as the posterior distribution of market trading rate. Numerical examples illustrating the optimal strategies and the comparisons with conventional trading strategies are conducted.

Call centres have been initiated primarily to reduce organisational cost while simultaneously providing high-quality service. However, it is now well established that the twin objectives of reducing costs per customer transaction and simultaneously encouraging the employees to be quality-oriented are fundamentally contradictory. This contradiction could have serious repercussions for an organisation's survival. In the context of the organisation studied, the imbalance between efficiency and customer service was the primary reason for closure complimented by a lack of resources, poor leadership and weak HR systems. Qualitative interviews with call centre agents impacted by the closure also revealed that the HR practices followed by the management during the process of closure could be labelled as non-socially responsible. Not only was the decision not communicated in advance to the employees, but they were also deprived of their salaries and incentives for the last few months that they worked with the organisation. Nonetheless, given that the closure took place in a buoyant economy most of them were able to find jobs almost immediately in well-established organisations with higher salaries, albeit with the shift of priority from high pay to high job security. The job search criteria used by participants' post-displacement emphasised non-economic criteria, probably providing answers for the problem of high labour turnover rates witnessed in the IT-enabled business services–business process outsourcing industry.