Abstract Evolving information te hnologies have brought omputational power and real-time fa ilities into the sto k market. Automated sto k trading draws mu h interest from both the elds of omputer s ien e and of business, sin e it promises to provide superior ability in a trading market than any individual trader. Trading strategies have been proposed and pra ti ed from the perspe tives of Arti...

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...

We analyze the correlations in patterns of trading for members of the Italian interbank trading platform e-MID. The trading strategy of a particular member institution is defined as the sequence of (intra-) daily net trading volumes within a certain semester. Based on this definition, we show that there are significant and persistent bilateral correlations between institutions' trading strategi...

 This paper characterizes the trailing-stop strategy for stock trading and provides a simulation model to evaluate its validity. Based on a discrete time computational model, we perform probabilistic analyses of the risks, rewards and trade-offs of such a trading strategy. Numerical examples using real data from the S&P 500 and the Dow Jones Industrial Average indicate that the trailing-stop s...

In dynamic and complex negotiation environments, a negotiation agent can participate or quit negotiation at any time and can reach an agreement with more than one trading partner as the result of the existence of dynamic outside options. Thus, it’s important for a negotiation agent to make a decision on when to complete negotiation given market dynamics. Rather than explicitly modelling all the...

We examine the optimal trading strategy for an investment fund which in the absence of transactions costs would like to maintain assets in exogenously fixed proportions, e.g. 60/30/10 in stocks, bonds and cash. Transactions costs are assumed to be proportional, but may differ with buying and selling, and may include a (positive) capital gains tax component. We show that the optimal policy invol...

This paper is concerned with a dynamic trading strategy, which involves multiple synthetic spreads each of which involves long positions in a basket of underlying securities and short positions in another basket. We assume that the spreads can be modeled as mean-reverting Ornstein-Uhlenbeck (OU) processes. The dynamic trading strategy is implemented as the solution to a stochastic optimal contr...

Exploiting the fact that insiders trade for a variety of reasons, we show that there is predictable, identifiable “routine” insider trading that is not informative for the future of firms. A portfolio strategy that focuses solely on the remaining “opportunistic” traders yields value-weighted abnormal returns of 82 basis points per month, while abnormal returns associated with routine traders ar...