VWAP execution and guaranteed VWAP

DOI10.1137/130924676MaRDI QIDQ2940767zbMATH OpenOpenAlexFDO

Authors Olivier Guéant, Guillaume Royer

Publication date 20 January 2015

Published in SIAM Journal on Financial Mathematics (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1306.2832

zbMATH Keywords

guaranteed VWAP contractindifference pricingoptimal controloptimal liquidationVWAP strategy

Mathematics Subject Classification ID

Existence theories for optimal control problems involving ordinary differential equations (49J15) Financial applications of other theories (91G80) Optimal stochastic control (93E20)

Abstract: Optimal liquidation using VWAP strategies has been considered in the literature, though never in the presence of permanent market impact and only rarely with execution costs. Moreover, only VWAP strategies have been studied and the pricing of guaranteed VWAP contracts has never been addressed. In this article, we develop a model to price guaranteed VWAP contracts in a general framework for market impact and we highlight the differences between an agency VWAP and a guaranteed VWAP contract. Numerical methods and applications are also provided.

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