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We introduce and analyze a natural algorithm for multi-venue exploration from censored data, which is motivated by the Dark Pool Problem of modern quantitative finance. We prove that our algorithm converges in polynomial time to a near-optimal allocation policy; prior results for similar problems in stochastic inventory control guaranteed only asymptotic convergence and examined variants in which each venue could be treated independently. Our analysis bears a strong resemblance to that of efficient exploration/ exploitation schemes in the reinforcement learning literature. We describe an extensive experimental evaluation of our algorithm on the Dark Pool Problem using real trading data.
Kuzman Ganchev, Michael J. Kearns, Yuriy Nevmyvaka, and Jennifer Wortman Vaughn, "Censored Exploration and the Dark Pool Problem", . January 2010.
Date Posted: 24 July 2012