Speed Bumps and Swells: Rethinking Optimal Trading with Stochastic Volatility
When markets move, they do so with both sudden shocks and slow drifts. Yet for years, much of optimal trading theory has treated volatility as if it were static—a constant backdrop rather than a dynamic participant in the game. The recent paper by Chan, Sircar, and Zimbidis decisively challenges that assumption by embedding multiscale stochastic volatility into a classical dynamic trading model. The result? A more nuanced, volatility-aware framework that adapts trading speed and target positions based on the fast and slow undulations of risk. ...