{"title":"Optimal Execution with Identity Optionality","authors":"R. Carmona, Claire Zeng","doi":"10.1080/1350486X.2023.2193343","DOIUrl":null,"url":null,"abstract":"ABSTRACT This paper investigates the impact of anonymous trading on the agents' strategy in an optimal execution framework. It mainly explores the specificity of order attribution on the Toronto Stock Exchange, where brokers can choose to either trade with their own identity or under a generic anonymous code that is common to all the brokers. We formulate a stochastic differential game for the optimal execution problem of a population of N brokers and incorporate permanent and temporary price impacts for both the identity-revealed and anonymous trading processes. We then formulate the limiting mean-field game of controls with common noise and obtain a solution in closed-form via the probablistic approach for the Almgren-Chris price impact framework. Finally, we perform a sensitivity analysis to explore the impact of the model parameters on the optimal strategy.","PeriodicalId":35818,"journal":{"name":"Applied Mathematical Finance","volume":null,"pages":null},"PeriodicalIF":0.0000,"publicationDate":"2022-07-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"1","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Applied Mathematical Finance","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.1080/1350486X.2023.2193343","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q3","JCRName":"Mathematics","Score":null,"Total":0}
引用次数: 1
Abstract
ABSTRACT This paper investigates the impact of anonymous trading on the agents' strategy in an optimal execution framework. It mainly explores the specificity of order attribution on the Toronto Stock Exchange, where brokers can choose to either trade with their own identity or under a generic anonymous code that is common to all the brokers. We formulate a stochastic differential game for the optimal execution problem of a population of N brokers and incorporate permanent and temporary price impacts for both the identity-revealed and anonymous trading processes. We then formulate the limiting mean-field game of controls with common noise and obtain a solution in closed-form via the probablistic approach for the Almgren-Chris price impact framework. Finally, we perform a sensitivity analysis to explore the impact of the model parameters on the optimal strategy.
期刊介绍：
The journal encourages the confident use of applied mathematics and mathematical modelling in finance. The journal publishes papers on the following: •modelling of financial and economic primitives (interest rates, asset prices etc); •modelling market behaviour; •modelling market imperfections; •pricing of financial derivative securities; •hedging strategies; •numerical methods; •financial engineering.
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