Optimal Control of a Semi-Markov Limit Order Book

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atmire.migration.oldid5854
dc.contributor.advisorSwishchuk, Anatoliy
dc.contributor.authorNovak, Joshua
dc.contributor.committeememberWare, Antony
dc.contributor.committeememberChoi, Kyoung Jin
dc.date.accessioned2017-08-11T22:12:18Z
dc.date.available2017-08-11T22:12:18Z
dc.date.issued2017
dc.date.submitted2017en
dc.description.abstractA Limit Order Book (LOB) is a financial exchange that automatically matches the orders of buyers and sellers according to a predefined priority rule. As the popularity of Limit Order markets has increased, more attention has been paid to the optimal strategies for an agent who wishes to buy or sell an equity on the order book. In this thesis, we first introduce challenges of market microstructure and concepts of stochastic optimal control such as the Dynamic Programming Principle, the Hamilton-Jacobi-Bellman Equation, and tools such as the Feynman-Kac Formula. Then, we present Fodra and Pham's model for the optimal risk-neutral market making strategy in a limit order book that follows a Semi-Markov stochastic process, and use numerical techniques in MATLAB to apply the theory to real-word Limit Order data. Statistical techniques such as Maximum Likelihood Estimation, the Kolmogorov-Smirnov Test and Akaike Information Criterion are employed to distributions such as the Generalized Inverse Gaussian. Finally, we find the optimal risk-neutral strategy in an extension of the model when the price process contains a stochastic bid-ask spread following a Markov Chain.en_US
dc.identifier.citationNovak, J. (2017). Optimal Control of a Semi-Markov Limit Order Book (Master's thesis, University of Calgary, Calgary, Canada). Retrieved from https://prism.ucalgary.ca. doi:10.11575/PRISM/27206en_US
dc.identifier.doihttp://dx.doi.org/10.11575/PRISM/27206
dc.identifier.urihttp://hdl.handle.net/11023/4013
dc.language.isoeng
dc.publisher.facultyGraduate Studies
dc.publisher.institutionUniversity of Calgaryen
dc.publisher.placeCalgaryen
dc.rightsUniversity of Calgary graduate students retain copyright ownership and moral rights for their thesis. You may use this material in any way that is permitted by the Copyright Act or through licensing that has been assigned to the document. For uses that are not allowable under copyright legislation or licensing, you are required to seek permission.
dc.subjectEconomics--Finance
dc.subjectMathematics
dc.subject.otherOptimal Control
dc.subject.otherMathematical Finance
dc.subject.otherMarket Microstructure
dc.subject.otherStochastic Processes
dc.titleOptimal Control of a Semi-Markov Limit Order Book
dc.typemaster thesis
thesis.degree.disciplineMathematics and Statistics
thesis.degree.grantorUniversity of Calgary
thesis.degree.nameMaster of Science (MSc)
ucalgary.item.requestcopytrue
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