Olivier Guéant (Université Paris 1)
Algorithmic market making for options
Thursday 20 February 2020, 18:00-19:00.
We tackle the problem of a market maker in charge of a book of derivatives on a single liquid underlying asset. By representing portfolio risk in terms of vega, we show that the market maker's optimal control problem is in fact tractable. The optimal market making strategy may be characterised by a two-dimensional functional equation that can be solved numerically using interpolation techniques and classical Euler schemes, even for large portfolios. Numerical examples are provided for a large book of equity options.
Olivier Guéant is professor of applied mathematics at Université Paris 1. His research focuses on optimal execution, algorithmic trading and related optimal control problems in finance. Guéant studied mathematics and economics at Ecole Normale Superieure (Paris); his PhD, under supervision of Pierre-Louis Lions, was the first doctoral thesis on the topic of Mean field games and applications in economics. In 2010, with H Verdier, J Lasry and P.L. Lions he co-founded MFG Labs, a start-up purchased by Havas Media in 2013.
Citi Stirling Square, 5-7 Carlton Gardens, London SW1Y 5AD
The seminar begins at 6:00 PM. Seating cannot be guaranteed for late arrivals.
Frontiers in Quantitative Finance is brought to you by the Oxford Mathematical and Computational Finance Group and sponsored by CitiGroup and Mosaic SmartData.