Charles-Albert Lehalle, Othmane Mounjid, M. Rosenbaum
{"title":"Optimal Liquidity-Based Trading Tactics","authors":"Charles-Albert Lehalle, Othmane Mounjid, M. Rosenbaum","doi":"10.1287/stsy.2021.0078","DOIUrl":null,"url":null,"abstract":"We consider an agent who needs to buy (or sell) a relatively small amount of assets over some fixed short time interval. We work at the highest frequency meaning that we wish to find the optimal tactic to execute our quantity using limit orders, market orders, and cancellations. To solve the agent’s control problem, we build an order book model and optimize an expected utility function based on our price impact. We derive the equations satisfied by the optimal strategy and solve them numerically. Moreover, we show that our optimal tactic enables us to outperform significantly naive execution strategies.","PeriodicalId":36337,"journal":{"name":"Stochastic Systems","volume":" ","pages":""},"PeriodicalIF":0.0000,"publicationDate":"2018-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"8","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Stochastic Systems","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.1287/stsy.2021.0078","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"Mathematics","Score":null,"Total":0}
引用次数: 8
Abstract
We consider an agent who needs to buy (or sell) a relatively small amount of assets over some fixed short time interval. We work at the highest frequency meaning that we wish to find the optimal tactic to execute our quantity using limit orders, market orders, and cancellations. To solve the agent’s control problem, we build an order book model and optimize an expected utility function based on our price impact. We derive the equations satisfied by the optimal strategy and solve them numerically. Moreover, we show that our optimal tactic enables us to outperform significantly naive execution strategies.
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