Optimal Portfolio Trading and Limit Order Book

Dr. Chen Jingnan

Singapore University of Technology and Design

About the Speaker

Dr. Chen is currently an Assistant Professor at Singapore University of Technology and Design (SUTD). She received her Ph.D. in Industrial Engineering from University of Illinois at Urbana-Champaign. Her research interest is Operations Research with application in Finance. She has developed theories and methodologies in the area of optimization and control to solve practical financial problems. In particular, her work includes portfolio management and execution for private sector and financial stress testing and systemic risk estimation for public sector. She has published in top-tier journals and received several academic awards.

About the Seminar

We study two portfolio trading problems:

1. An order placement problem where the objective is to execute an order at the minimal cost and risk; and
2. A deleveraging problem where the objective is to meet leverage requirements with the minimal equity sacrifice.

In the order placement problem, we consider both market and limit orders in a simple model of market dynamics. We propose a dynamic program to find the optimal strategy for risk-neutral and risk-inverse traders.

In the deleveraging problem, we include cross-asset price impact in addition to direct price impact in our model setup. The problem is then converted to a non-convex quadratically constrained quadratic program and we develop different optimization techniques to obtain the deleveraging strategy for small-size and large-size portfolios, respectively.