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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


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...
(116 days ago)

Jim Gatheral wrote a new blog post titled REVISION: No-Dynamic-Arbitrage and Market Impact

Starting from a no-dynamic-arbitrage principle that imposes that trading costs should be non-negative on average and a simple model for the evolution of market prices, we demonstrate a relationship between the shape of the market impact function describing the average response of the market price to traded quantity and the function that describes the decay of market impact. In particular, we show that the widely-assumed exponential decay of market impact is compatible only with linear market impact. We derive various inequalities relating the typical shape of the observed market impact...
(116 days ago)

Jim Gatheral wrote a new blog post titled REVISION: Implied Volatility from Local Volatility: A Path Integral Approach

Assuming local volatility, we derive an exact Brownian bridge representation for the transition density; an exact expression for the transition density in terms of a path integral then follows. By Taylor-expanding around a certain path, we obtain a generalization of the heat kernel expansion of the density which coincides with the classical one in the time-homogeneous case, but is more accurate and natural in the time inhomogeneous case. As a further application of our path integral representation, we obtain an improved most-likely-path approximation for implied volatility in terms of local...
(216 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.