Capital-Constrained Scheduling of Trades with Maturities

Summary

The document frames a problem in which a trader chooses among candidate forward trades with known expected profits and maturity dates while operating under a finite capital limit. Since positions tie up capital until maturity, taking a profitable trade now can prevent the trader from accepting a better opportunity later. Available capital changes as existing contracts mature, making the decision a problem over time rather than a one-time portfolio selection.

The author asks for established terminology, methods, and references for studying this optimization problem. The document does not propose a solution or provide empirical evidence; it is a request for pointers. Any formal model would need to specify how trade profits and capital requirements are measured, when opportunities arrive, and whether future opportunities are known or uncertain. Those details affect which scheduling or stochastic optimization approach is suitable.

Key ideas

• Finite capital can prevent a trader from accepting every available opportunity.
• Trade maturities determine when committed capital becomes available again.
• A profitable trade today can have an opportunity cost if it blocks a better future trade.
• The document seeks established research terminology and methods but gives no proposed solution.

Tags

# How to choose trades over time when capital is limited


# How to choose trades over time when capital is limited












Say I'm in the business of trading forward contracts. So at some point in time, I look at the markets, and determine a number of trades I could make. For each trade, I know the profit I expect to make, and the maturity date.

However, I can't make all the trades, because I only have finite capital (sad times). Even if I could make all the trades with the capital I have, it's possible that tomorrow I'll find new trades I can't make because all the capital is invested. So by making a good trade today I may miss the opportunity of making an even better trade tomorrow. The amount of available capital also varies over time, as the futures mature.

This looks like an interesting optimisation problem, so I suppose it's been exhaustively studied. But I've googled around and searched this site and came up empty, I believe because I lack the right vocabulary to describe the problem in the same way practitioners of the relevant discipline do.

So any pointers would be appreciated - both relevant articles / papers / books, or even if this is a well-known problem with a well-known name so I can be more successful with my research.

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.