Kevin Darby
Chapel Hill, North Carolina, United States
1K followers
500+ connections
Activity
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Our second paper about how dopamine release in the brain encodes information about visual threats is coming together. We hope this foundational work…
Our second paper about how dopamine release in the brain encodes information about visual threats is coming together. We hope this foundational work…
Liked by Kevin Darby
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It's more than an idea, a life plan, a decision; it's now the next chapter. I have the badge to prove it! 😉 Now Teach Institute of Physics…
It's more than an idea, a life plan, a decision; it's now the next chapter. I have the badge to prove it! 😉 Now Teach Institute of Physics…
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I’m excited to share that I’ve started a new position as Director of Marketing at BlockFills. BlockFills is a #crypto trading solutions and…
I’m excited to share that I’ve started a new position as Director of Marketing at BlockFills. BlockFills is a #crypto trading solutions and…
Liked by Kevin Darby
Experience
Education
Publications
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Time is Money: The Equilibrium Trading Horizon and Optimal Arrival Price
American Journal of Applied Mathematics
Abstract
Executing even moderately large derivatives orders can be expensive and risky; it’s hard to balance the uncertainty of working an order over time versus paying a liquidity premium for immediate execution. Here, we introduce the Time Is Money model, which calculates the Equilibrium Trading Horizon over which to execute an order within the adversarial forces of variance risk and liquidity premium. We construct a hypothetical at-the-money option within Arithmetic Brownian Motion…Abstract
Executing even moderately large derivatives orders can be expensive and risky; it’s hard to balance the uncertainty of working an order over time versus paying a liquidity premium for immediate execution. Here, we introduce the Time Is Money model, which calculates the Equilibrium Trading Horizon over which to execute an order within the adversarial forces of variance risk and liquidity premium. We construct a hypothetical at-the-money option within Arithmetic Brownian Motion and invert the Bachelier model to compute an inflection point between implied variance and liquidity cost as governed by a central limit order book, each in real time as they evolve. As a result, we demonstrate a novel, continuous-time Arrival Price framework. Further, we argue that traders should be indifferent to choosing between variance risk and liquidity cost, unless they have a predetermined bias or an exogenous position with a convex payoff. We, therefore, introduce half-life factor asymptotics to the model based on a convexity factor and compare results to existing models. We also describe a specialization of the model for trading a basket of correlated instruments, as exemplified by a futures calendar spread. Finally, we establish groundwork for microstructure optimizations as well as explore short term drift and conditional expected slippage within the Equilibrium Horizon framework.
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He is the most intersting man in the world!
He is the most intersting man in the world!
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I am leaving Cboe Digital in mid-July. It has been an incredible run and I am grateful for the past six years. As I approach the end, it is hard not…
I am leaving Cboe Digital in mid-July. It has been an incredible run and I am grateful for the past six years. As I approach the end, it is hard not…
Liked by Kevin Darby
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Next week, I'll be the guest editor for the informative and infamous John Lothian Newsletter. Its motto is "irreverent, but never irrelevant", so…
Next week, I'll be the guest editor for the informative and infamous John Lothian Newsletter. Its motto is "irreverent, but never irrelevant", so…
Liked by Kevin Darby
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