Optimal portfolio liquidation with limit orders
From MaRDI portal
Publication:4902233
DOI10.1137/110850475zbMATH Open1262.91160arXiv1106.3279OpenAlexW2148176228MaRDI QIDQ4902233FDOQ4902233
Authors: Olivier Guéant, Charles-Albert Lehalle, Joaquin Fernandez-Tapia 
Publication date: 25 January 2013
Published in: SIAM Journal on Financial Mathematics (Search for Journal in Brave)
Abstract: This paper addresses the optimal scheduling of the liquidation of a portfolio using a new angle. Instead of focusing only on the scheduling aspect like Almgren and Chriss, or only on the liquidity-consuming orders like Obizhaeva and Wang, we link the optimal trade-schedule to the price of the limit orders that have to be sent to the limit order book to optimally liquidate a portfolio. Most practitioners address these two issues separately: they compute an optimal trading curve and they then send orders to the markets to try to follow it. The results obtained here solve simultaneously the two problems. As in a previous paper that solved the "intra-day market making problem", the interactions of limit orders with the market are modeled via a Poisson process pegged to a diffusive "fair price" and a Hamilton-Jacobi-Bellman equation is used to solve the problem involving both non-execution risk and price risk. Backtests are carried out to exemplify the use of our results, both on long periods of time (for the entire liquidation process) and on slices of 5 minutes (to follow a given trading curve).
Full work available at URL: https://arxiv.org/abs/1106.3279
Recommendations
Portfolio theory (91G10) Hamilton-Jacobi equations (35F21) Existence theories for optimal control problems involving partial differential equations (49J20) Optimal stochastic control (93E20)
Cited In (54)
- A Leland model for delta hedging in central risk books
- Predictable Losses of Liquidity Provision in Constant Function Markets and Concentrated Liquidity Markets
- Do price trajectory data increase the efficiency of market impact estimation?
- An optimal trading problem in intraday electricity markets
- Optimal portfolio liquidation with additional information
- Drift dependence of optimal trade execution strategies under transient price impact
- Optimal Execution with Dynamic Order Flow Imbalance
- Optimal Liquidation in a Level-I Limit Order Book for Large-Tick Stocks
- Market making and portfolio liquidation under uncertainty
- Optimal Liquidity-Based Trading Tactics
- Optimal execution with stochastic delay
- SIMULTANEOUS TRADING IN ‘LIT’ AND DARK POOLS
- Equilibrium Model of Limit Order Books: A Mean-Field Game View
- Recent advances in reinforcement learning in finance
- Mean-Field Game Strategies for Optimal Execution
- Optimal portfolio execution under time-varying liquidity constraints
- Risk aversion and the dynamics of optimal liquidation strategies in illiquid markets
- Optimal Execution: A Review
- Optimal Market Making under Partial Information with General Intensities
- On Regularized Optimal Execution Problems and Their Singular Limits
- A correction note for price dynamics in a Markovian limit order market
- Title not available (Why is that?)
- Optimal execution with limit and market orders
- Optimal bookmaking
- Multi-dimensional optimal trade execution under stochastic resilience
- Optimal hedging through limit orders
- OPTIMAL TRADING STRATEGIES WITH LIMIT ORDERS
- Efficiency of the price formation process in presence of high frequency participants: a mean field game analysis
- GENERAL INTENSITY SHAPES IN OPTIMAL LIQUIDATION
- Dealing with the inventory risk: a solution to the market making problem
- Optimal liquidation problem in illiquid markets
- The optimal control of institutional investors' liquidation cost
- Optimal Liquidation of Child Limit Orders
- Optimal portfolio execution problem with stochastic price impact
- Trading strategy with stochastic volatility in a limit order book market
- Optimal Decisions in a Time Priority Queue
- TRADING STRATEGIES WITHIN THE EDGES OF NO-ARBITRAGE
- Incorporating signals into optimal trading
- Optimal execution cost for liquidation through a limit order market
- Double-Execution Strategies Using Path Signatures
- Hedge and Speculate: Replicating Option Payoffs with Limit and Market Orders
- Algorithmic trading for online portfolio selection under limited market liquidity
- Price impact on term structure
- OPTIMAL LIQUIDATION AND ADVERSE SELECTION IN DARK POOLS
- A class of optimal liquidation problem with a nonlinear temporary market impact
- Optimal liquidation in a limit order book for a risk-averse investor
- Modeling uncertainty in limit order execution
- Market or limit orders?
- Multi-asset Optimal Execution and Statistical Arbitrage Strategies under Ornstein--Uhlenbeck Dynamics
- Optimal liquidation through a limit order book: a neural network and simulation approach
- Optimal placement in a limit order book: an analytical approach
- Optimal Execution and Block Trade Pricing: A General Framework
- Optimal market making
- PORTFOLIO LIQUIDATION IN DARK POOLS IN CONTINUOUS TIME
This page was built for publication: Optimal portfolio liquidation with limit orders
Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q4902233)
