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Title: Professor

Short Description: Current research interests: Volatility modeling, market impact, and optimal execution.

Institution: Baruch College

Department: Department of Mathematics

Special Academic Interests: , ,

Location: New York, USA

SSRN Author Page: link

Is this Member on the AGENDA team?: No

Joined: June 25th, 2011

Activity

Jim Gatheral wrote a new blog post titled REVISION: Pricing Under Rough Volatility

From an analysis of the time series of volatility using recent high frequency data, Gatheral, Jaisson and Rosenbaum previously showed that log-volatility behaves essentially as a fractional Brownian motion with Hurst exponent H of order 0.1, at any reasonable time scale. The resulting Rough Fractional Stochastic Volatility (RFSV) model is remarkably consistent with financial time series data. We now show how the RFSV model can be used to price claims on both the underlying and integrated volatility. We analyze in detail a simple case of this model, the rBergomi model. In particular, we...
(176 days ago)

Jim Gatheral wrote a new blog post titled REVISION: Discrete Homotopy Analysis for Optimal Trading Execution with Nonlinear Transient Market Impact

Optimal execution in financial markets is the problem of how to trade a large quantity of shares incrementally in time in order to minimise the expected cost. In this paper we study the problem of the optimal execution in the presence of nonlinear transient market impact. Mathematically such problem is equivalent to solve a strongly nonlinear integral equation, which in our model is a weakly singular Urysohn equation of the first kind. We propose an approach based on homotopy analysis method (HAM), whereby a well behaved initial trading strategy is continuously deformed to lower the expected...
(225 days ago)

Jim Gatheral wrote a new blog post titled REVISION: Optimal Execution with Nonlinear Transient Market Impact

We study the problem of the optimal execution of a large trade in the propagator model with nonlinear transient impact. From brute force numerical optimization of the cost functional, we find that the optimal solution for a buy program typically features a few short intense buying periods separated by long periods of weak selling. Indeed, in some cases we find negative expected cost. We show that this undesirable characteristic of the nonlinear transient impact model may be mitigated either by introducing a bid-ask spread cost or by imposing convexity of the instantaneous market impact...
(225 days ago)

About me:

Jim Gatheral worked at Bank of America and Bankers Trust before heading the Equity Quantitative Analytics group at Merrill Lynch in 1996, where he was a managing director for 17 years. In 1998 he became a fellow of the Masters Program of Mathematics in Finance at the Courant Institute of Mathematical Sciences of New York University. In March 2010 Jim assumed a tenured full professor position at the Financial Engineering Masters Program at Baruch College where he is teaching volatility surface modeling and market microstructure.