Algorithmic brokers benchmarked to TWAP or VWAP face a limit-order market-order tradeoff when slicing orders. Executing market orders keeps them on schedule but is costly. Executing limit orders saves spread but can lead to schedule slippage. We build on our results in the discrete shares case Li [2012] to present an optimal solution for execution in light of this tradeoff in the limit of continuous shares. As in the discrete case, the optimal solution is described in terms of a forward and backward boundary which define how many limit orders should be placed on the order book and when to execute market orders. Closed-form solutions for the boundaries are derived for the “stationary limit.” These boundaries can be computed numerically in the general case.
{"title":"Optimal Limit-versus-Market Order Slicing Under a VWAP Benchmark - Continuous Case","authors":"T. Li","doi":"10.2139/ssrn.2318896","DOIUrl":"https://doi.org/10.2139/ssrn.2318896","url":null,"abstract":"Algorithmic brokers benchmarked to TWAP or VWAP face a limit-order market-order tradeoff when slicing orders. Executing market orders keeps them on schedule but is costly. Executing limit orders saves spread but can lead to schedule slippage. We build on our results in the discrete shares case Li [2012] to present an optimal solution for execution in light of this tradeoff in the limit of continuous shares. As in the discrete case, the optimal solution is described in terms of a forward and backward boundary which define how many limit orders should be placed on the order book and when to execute market orders. Closed-form solutions for the boundaries are derived for the “stationary limit.” These boundaries can be computed numerically in the general case.","PeriodicalId":374208,"journal":{"name":"Chicago Booth Fama-Miller: Finance - Other (Topic)","volume":"22 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-01-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131950427","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Portfolio selection simulator of social interaction is proposed in this paper. We explained why different investors possess different portfolios in time and why portfolios change with the change of the environment. The developments of the games are path-dependent depending on several factors. The most significant are the returns, the rate of maximization, selection of an investor, the presence of liquidity investors and the number of alternatives. The main empirical conclusion is that investors opt for medium-risky to risky alternatives and avoid both extremes.
{"title":"Artificial Portfolio Simulator","authors":"Matjaž Steinbacher","doi":"10.2139/ssrn.1476460","DOIUrl":"https://doi.org/10.2139/ssrn.1476460","url":null,"abstract":"Portfolio selection simulator of social interaction is proposed in this paper. We explained why different investors possess different portfolios in time and why portfolios change with the change of the environment. The developments of the games are path-dependent depending on several factors. The most significant are the returns, the rate of maximization, selection of an investor, the presence of liquidity investors and the number of alternatives. The main empirical conclusion is that investors opt for medium-risky to risky alternatives and avoid both extremes.","PeriodicalId":374208,"journal":{"name":"Chicago Booth Fama-Miller: Finance - Other (Topic)","volume":"50 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2009-09-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124832659","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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