Advanced Search
MyIDEAS: Login

Drift dependence of optimal trade execution strategies under transient price impact


Author Info

  • Christopher Lorenz
  • Alexander Schied
Registered author(s):


    We give a complete solution to the problem of minimizing the expected liquidity costs in presence of a general drift when the underlying market impact model has linear transient price impact with exponential resilience. It turns out that this problem is well-posed only if the drift is absolutely continuous. Optimal strategies often do not exist, and when they do, they depend strongly on the derivative of the drift. Our approach uses elements from singular stochastic control, even though the problem is essentially non-Markovian due to the transience of price impact and the lack in Markovian structure of the underlying price process. As a corollary, we give a complete solution to the minimization of a certain cost-risk criterion in our setting.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL:
    File Function: Latest version
    Download Restriction: no

    Bibliographic Info

    Paper provided by in its series Papers with number 1204.2716.

    as in new window
    Date of creation: Apr 2012
    Date of revision: Mar 2013
    Handle: RePEc:arx:papers:1204.2716

    Contact details of provider:
    Web page:

    Related research


    This paper has been announced in the following NEP Reports:


    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Guéant, Olivier & Lehalle, Charles-Albert & Tapia, Joaquin Fernandez, 2011. "Optimal Portfolio Liquidation with Limit Orders," Economics Papers from University Paris Dauphine 123456789/7391, Paris Dauphine University.
    2. Olivier Gu\'eant & Charles-Albert Lehalle & Joaquin Fernandez Tapia, 2011. "Optimal Portfolio Liquidation with Limit Orders," Papers 1106.3279,, revised Jul 2012.
    Full references (including those not matched with items on IDEAS)



    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.


    Access and download statistics


    When requesting a correction, please mention this item's handle: RePEc:arx:papers:1204.2716. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (arXiv administrators).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.