Optimal Market-Making with Risk Aversion
成果类型：
Article
署名作者：
Huang, Kan; Simchi-Levi, David; Song, Miao
署名单位：
Massachusetts Institute of Technology (MIT); Massachusetts Institute of Technology (MIT); Massachusetts Institute of Technology (MIT); University of Hong Kong
刊物名称：
OPERATIONS RESEARCH
ISSN/ISSBN：
0030-364X
DOI：
10.1287/opre.1120.1039
发表日期：
2012
页码：
541-565
关键词：
摘要：
Market-makers have the obligation to trade any given amount of assets at quoted bid or ask prices, and their inventories are exposed to the potential loss when the market price moves in an undesirable direction. One approach to reduce the risk brought by price uncertainty is to adjust the inventory at the price of losing potential spread gain. Using stochastic dynamic programming, we show that a threshold inventory control policy is optimal with respect to an exponential utility criterion and a mean-variance trade-off model. Symmetric and monotone properties of the threshold levels are also established.