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SUMMARY:Finance and Stochastics Seminar – Emilio Barucci
DESCRIPTION:Speaker: Emilio Barucci\nTitle: Trading and optimal execution i
 n futures and spot markets with cross impacts\nAbstract: We study the inve
 ntory management of a trader operating in spot and futures markets when th
 e futures basis vanishes at maturity and exhibits mean-reversion. The mode
 l distinguishes between the primary market\, where new information is inco
 rporated into prices\, from the secondary market whose price contains a me
 an reverting basis component. We characterize the optimal trading strategy
  under both cash settlement and physical delivery. We show that access to 
 the secondary market creates a statistical-arbitrage opportunity starting 
 from zero initial wealth by allowing the trader to exploit the intertempor
 al mean reversion of the basis. Trading mostly occurs in the secondary mar
 ket. If the spot market is the primary one\, then\, under physical deliver
 y\, the futures contract creates an incentive to hedge the inventory in th
 e underlying asset\; whereas under cash settlement the strategy is primari
 ly driven by basis trading in the secondary market with no hedging. If the
  futures market is the primary one\, then hedging occurs in that market fo
 r a physical delivery contract. There is no evidence of market manipulatio
 n (buy-low/sell-high) across the two markets. In the optimal-execution pro
 blem\, access to futures markets increases the trader’s expected payoff 
 relative to the classical spot-only benchmark and alters the optimal liqui
 dation dynamics\, the liquidation of the position proceeds at a lower rate
  in case of a cash-settled futures contract. The possibility to rollover t
 he futures position by extending its maturity is investigated. An applicat
 ion to the gold futures market is provided. It is a joint work with Yuheng
  Lan and Leandro Sanchez-Betancourt.
URL:https://www.imperial.ac.uk/events/213987/finance-and-stochastics-semina
 r-emilio-barucci/
DTSTART;TZID=Europe/London:20261027T140000
DTEND;TZID=Europe/London:20261027T150000
LOCATION:140\, Huxley Building\, South Kensington Campus\, Imperial College
  London\, London\, SW7 2AZ\, United Kingdom
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