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Optimal Trade Execution Under Geometric Brownian Motion In The Almgren And Chriss Framework

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Author Info

  • JIM GATHERAL

    () (Department of Mathematics, Baruch College, CUNY, One Bernard Baruch Way, New York, NY 10010, USA)

  • ALEXANDER SCHIED

    () (Department of Mathematics, University of Mannheim, A5, 6, 68131 Mannheim, Germany)

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    Abstract

    With an alternative choice of risk criterion, we solve the HJB equation explicitly to find a closed-form solution for the optimal trade execution strategy in the Almgren–Chriss framework assuming the underlying unaffected stock price process is geometric Brownian motion.

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    Bibliographic Info

    Article provided by World Scientific Publishing Co. Pte. Ltd. in its journal International Journal of Theoretical and Applied Finance.

    Volume (Year): 14 (2011)
    Issue (Month): 03 ()
    Pages: 353-368

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    Handle: RePEc:wsi:ijtafx:v:14:y:2011:i:03:p:353-368

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    Related research

    Keywords: HJB; optimal execution; risk measures; market impact;

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    Cited by:
    1. Olivier Gu\'eant, 2012. "Optimal execution and block trade pricing: a general framework," Papers 1210.6372, arXiv.org, revised Oct 2012.
    2. Florian Kl\"ock & Alexander Schied & Yuemeng Sun, 2012. "Price manipulation in a market impact model with dark pool," Papers 1205.4008, arXiv.org.
    3. Mauricio Labadie & Charles-Albert Lehalle, 2010. "Optimal trading algorithms and selfsimilar processes: a p-variation approach," Working Papers hal-00546145, HAL.
    4. Olivier Gu\'eant & Charles-Albert Lehalle, 2012. "General Intensity Shapes in Optimal Liquidation," Papers 1204.0148, arXiv.org, revised Apr 2013.
    5. Damiano Brigo & Giuseppe Di Graziano, 2013. "Optimal execution comparison across risks and dynamics, with solutions for displaced diffusions," Papers 1304.2942, arXiv.org.

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