Optimal trading under non-negativity constraints using approximate dynamic programming

Optimal Learning and Approximate Dynamic Programming

Approximate dynamic programming (ADP) has emerged as a powerful tool for tackling a diverse collection of stochastic optimization problems. Reflecting the wide diversity of problems, ADP (including research under names such as reinforcement learning, adaptive dynamic programming and neuro-dynamic programming) has become an umbrella for a wide range of algorithmic strategies. Most of these invol...

Transaction-Cost-Conscious Pairs Trading via Approximate Dynamic Programming

In this paper, we develop an algorithm that optimizes logarithmic utility in pairs trading. We assume price processes for two assets, with transaction cost linear with respect to the rate of change in portfolio weights. We then solve the optimization problem via a linear programming approach to approximate dynamic programming. Our simulation results show that when asset price volatility and tra...

Optimal Day-Ahead Trading and Storage of Renewable Energies - An Approximate Dynamic Programming Approach

A renewable power producer who trades on a day-ahead market sells electricity under supply and price uncertainty. Investments in energy storage mitigate the associated financial risks and allow for decoupling the timing of supply and delivery. This paper introduces a model of the optimal bidding strategy for a hybrid system of renewable power generation and energy storage. We formulate the prob...

Risk-Constrained Forward Trading Optimization by Stochastic Approximate Dynamic Programming

Approximate Disassembly Using Dynamic Programming

Most commercial anti-virus software uses signature based techniques to detect whether a file is infected by a virus or not. However, signature based detection systems are unable to detect metamorphic viruses, since such viruses change their internal structure from generation to generation. Previous work has shown that hidden Markov models (HMMs) can be used to detect metamorphic viruses. In thi...