Optimal trade execution in illiquid markets
From MaRDI portal
Publication:3100751
DOI10.1111/J.1467-9965.2010.00446.XzbMATH Open1233.91335arXiv0902.2516OpenAlexW1564085775MaRDI QIDQ3100751FDOQ3100751
Authors: Erhan Bayraktar, Michael Ludkovski 
Publication date: 21 November 2011
Published in: Mathematical Finance (Search for Journal in Brave)
Abstract: We study optimal trade execution strategies in financial markets with discrete order flow. The agent has a finite liquidation horizon and must minimize price impact given a random number of incoming trade counterparties. Assuming that the order flow is given by a Poisson process, we give a full analysis of the properties and computation of the optimal dynamic execution strategy. Extensions, whereby (a) is a fully-observed regime-switching Poisson process; and (b) is a Markov-modulated compound Poisson process driven by a hidden Markov chain, are also considered. We derive and compare the properties of the three cases and illustrate our results with computational examples.
Full work available at URL: https://arxiv.org/abs/0902.2516
Recommendations
- Optimal trade execution under price-sensitive risk preferences
- Optimal trade execution in an order book model with stochastic liquidity parameters
- Optimal trade execution in order books with stochastic liquidity
- Optimal investment on finite horizon with random discrete order flow in illiquid markets
- Optimal trade execution under stochastic volatility and liquidity
Portfolio theory (91G10) Applications of renewal theory (reliability, demand theory, etc.) (60K10) Financial applications of other theories (91G80)
Cites Work
- Risk aversion and the dynamics of optimal liquidation strategies in illiquid markets
- Optimal trade execution in illiquid markets
- Optimal execution strategies in limit order books with general shape functions
- Title not available (Why is that?)
- Optimal execution with nonlinear impact functions and trading-enhanced risk
- Sequential tracking of a hidden Markov chain using point process observations
- On an optimal selection problem of Cowan and Zabczyk
- Title not available (Why is that?)
- A full information pricing problem for the sale of several identical commodities
- Inventory management with partially observed nonstationary demand
Cited In (54)
- Dynamic optimal execution in a mixed-market-impact Hawkes price model
- Optimal trade execution in order books with stochastic liquidity
- Optimal trade execution under jump diffusion process: a mean-VaR approach
- Optimal execution with uncertain order fills in Almgren-Chriss framework
- Càdlàg semimartingale strategies for optimal trade execution in stochastic order book models
- Execution shortfall algorithms under regime switching
- Endogenous formation of limit order books: dynamics between trades
- Optimal execution with stochastic delay
- SIMULTANEOUS TRADING IN ‘LIT’ AND DARK POOLS
- OPTIMAL EXECUTION HORIZON
- Mean-Field Game Strategies for Optimal Execution
- A guided tour of new results on ``trade execution in illiquid markets
- Optimal decisions in a time priority queue
- Optimal Execution: A Review
- Optimal trade execution under price-sensitive risk preferences
- Optimal trade execution under stochastic volatility and liquidity
- Optimal execution with limit and market orders
- An algorithmic approach to optimal asset liquidation problems
- Optimal trade execution: a mean quadratic variation approach
- Apparent impact: the hidden cost of one-shot trades
- Optimal order execution using hidden orders
- Applications of microscopic modelling in finance
- Incorporating order-flow into optimal execution
- Optimal trade execution in an order book model with stochastic liquidity parameters
- Optimal trade execution in illiquid markets
- Optimal execution and block trade pricing: a general framework
- Optimal liquidation problem in illiquid markets
- Optimal control of semi-Markov processes with a backward stochastic differential equations approach
- Algorithmic trading with learning
- Strategic trading in illiquid markets.
- Liquidation in limit order books with controlled intensity
- Optimal trade execution and price manipulation in order books with time-varying liquidity
- Optimal liquidity-based trading tactics
- Does the Prohibition of Trade-Through Hurt Liquidity Demanders?
- Optimal market making under partial information with general intensities
- Optimal trading with stochastic liquidity and volatility
- Discrete-time optimal execution under a generalized price impact model with markovian exogenous orders
- The Shadow Price of Latency: Improving Intraday Fill Ratios in Foreign Exchange Markets
- Dynamic equilibrium limit order book model and optimal execution problem
- Execution in an aggregator
- Pricing European options in a discrete time model for the limit order book
- Optimal investment on finite horizon with random discrete order flow in illiquid markets
- Multivariate Hawkes-based models in limit order book: European and spread option pricing
- Optimal execution with dynamic order flow imbalance
- Algorithmic trading with model uncertainty
- Optimal order placement in limit order markets
- Optimal trade execution with instantaneous price impact and stochastic resilience
- Impact of time illiquidity in a mixed market without full observation
- Optimal timing for short covering of an illiquid security
- Optimal liquidation in dark pools
- An explicit optimal strategy for flow trades at NASDAQ around its close
- Optimal trade execution for Gaussian signals with power-law resilience
- Rate control under heavy traffic with strategic servers
- Optimal trade execution under endogenous pressure to liquidate: theory and numerical solutions
This page was built for publication: Optimal trade execution in illiquid markets
Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q3100751)
