Multiple executions in competition
Seminar in Insurance and Economics
SPEAKER: Marina Di Giacinto (University of Cassino and Southern Lazio).
TITLE: Multiple executions in competition.
ABSTRACT: We consider the problem of multiple order executions in competition as differential games and investigate their associated equilibria in two regimes: Stackelberg and Nash games. Price impact during execution encompasses permanent, transient with a delay kernel of Erlang-type, and temporary or slippage impacts. The Erlang-type kernel provides the flexibility of specifying a maximal impact from the lagged past tradings as opposed to sheer decaying kernels such as exponential or power law. The resulting price impact model remains Markovian in an extended but finite-dimensional state space. Dynamic programming principle is thus applicable, and equilibria in the two differential games are obtained by solving systems of Riccati equations. Numerical experiments are conducted to illustrate the theoretical results.