Periodic strategies in optimal execution with multiplicative price impact

DOI10.1111/MAFI.12208zbMATH Open1433.91157arXiv1705.00284OpenAlexW2921200109MaRDI QIDQ5204850FDOQ5204850

Harold A. Moreno-Franco, Daniel Hernández-Hernández, José Luis Pérez Garmendia

Publication date: 5 December 2019

Published in: Mathematical Finance (Search for Journal in Brave)

Abstract: In this work we study the optimal execution problem with multiplicative price impact in algorithm trading, when an agent holds an initial position of shares of a financial asset. The inter-selling-decision times are modelled by the arrival times of a Poisson process. The criterion to be optimised consists in maximising the expected net present value of gains of the agent, and it is proved that an optimal strategy has a barrier form, depending only on the number of shares left and the level of asset price.

Full work available at URL: https://arxiv.org/abs/1705.00284

zbMATH Keywords

multiplicative price impactperiodic barrier strategiesoptimal execution problemarrival times of Poisson process

Mathematics Subject Classification ID

Portfolio theory (91G10) Dynamic programming in optimal control and differential games (49L20) Financial applications of other theories (91G80)

Cited In (1)

• Hamilton-Jacobi-Bellman-Isaacs equation for rational inattention in the long-run management of river environments under uncertainty

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