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Paper / 2025SMQ / 132267100989263
De Finetti's problem with fixed transaction costs and regime switching
Kaixin Yan / Kazutoshi Yamazaki / Wenyuan Wang / Xiaowen Zhou / Zuo Quan Xu
optimization / stochastic processesResource overview

De Finetti's problem with fixed transaction costs and regime switching

Paper2025

by Kaixin Yan, Kazutoshi Yamazaki, Wenyuan Wang, Xiaowen Zhou, Zuo Quan Xu

Tags
optimizationstochastic processestransaction costs

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Suggested foundations for stochastic processes and pricing and market microstructure and execution. Specialist prerequisites vary by paper.

Before you read

  1. Conditional Expectation

    Understand what it means to condition on current information.

  2. Stochastic Processes, Brownian Motion and Itô's Lemma

    Follow Brownian dynamics and the second-order term in Itô calculus.

  3. Order Books

    Read bid, ask, depth and queue-based market state.

  4. Order Flow and Adverse Selection

    Understand why fills and order flow can carry information.

Go further

  1. Market Model and Risk-Neutral Valuation

    Connect stochastic dynamics to no-arbitrage prices.

  2. Simulating SDEs

    Translate continuous dynamics into a numerical experiment.

  3. Market Impact

    Connect trading speed and size to execution cost.

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