arXiv subjects

Alberto Gennaro

Publications and source records attributed to Alberto Gennaro.

3 recordsLinked to original sources

arXiv2026

Signature Methods for Optimal Market Making

We propose a signature-based method to solve the optimal market-making problem under a mean-variance criterion. By exploiting signature linearization techniques, we reduce the market-making problem to a pseudo-linear optimization over the expected signature of an augmented market path, and we develop a signature algorithm named Sig-REINFORCE to learn the optimal bid and ask quotes. We test our method in two scenarios, in which market-order arrivals follow either a Poisson or a self-exciting Hawkes process, and we benchmark it against a Proximal Policy Optimization (PPO) baseline.

math.OC↗

arXiv2025

2BSDE with uncertain horizon and application to stochastic control in erratic environments

We investigate the existence and uniqueness of non-Markovian second-order backward stochastic differential equations with an uncertain terminal horizon and establish comparison principles under the assumption that the driver is Lipschitz continuous. The terminal time is both random and exogenous, and it may not be adapted to the Brownian filtration, leading to a singular jump in the 2BSDE decomposition. We also provide a connection between this new class of 2BSDE and a fully nonlinear PDE in a Markovian setting. Our theoretical results are applied to non-Markovian stochastic control problems in two settings: (1) when an agent seeks to maximize utility from a payoff received at an uncertain terminal time by controlling both the drift and volatility of a diffusion process; and (2) when the agent contends with volatility uncertainty stemming from an external source, referred to as Nature, and optimizes the drift in a worst-case scenario for the ambiguous volatility. We term this class of problems erratic stochastic control, reflecting the dual uncertainty in both model parameters and the timing of the terminal horizon.

math.PR↗

arXiv2024

Delegated portfolio management with random default

We are considering the problem of optimal portfolio delegation between an investor and a portfolio manager under a random default time. We focus on a novel variation of the Principal-Agent problem adapted to this framework. We address the challenge of an uncertain investment horizon caused by an exogenous random default time, after which neither the agent nor the principal can access the market. This uncertainty introduces significant complexities in analyzing the problem, requiring distinct mathematical approaches for two cases: when the random default time falls within the initial time frame [0,T] and when it extends beyond this period. We develop a theoretical framework to model the stochastic dynamics of the investment process, incorporating the random default time. We then analyze the portfolio manager's investment decisions and compensation mechanisms for both scenarios. In the first case, where the default time could be unbounded, we apply traditional results from Backward Stochastic Differential Equations (BSDEs) and control theory to address the agent problem. In the second case, where the default time is within the interval [0,T], the problem becomes more intricate due to the degeneracy of the BSDE's driver. For both scenarios, we demonstrate that the contracting problem can be resolved by examining the existence of solutions to integro-partial Hamilton-Jacobi-Bellman (HJB) equations in both situations. We develop a deep-learning algorithm to solve the problem in high-dimension with no access to the optimizer of the Hamiltonian function.

q-fin.MF↗