Optimal Liquidity Trading
AbstractWe study optimal liquidity trading in a framework where trade size has a price impact. A liquidity trader wishes to trade a fixed number of shares within a certain time horizon and to minimize the mean and variance of the costs of trading. Explicit formulas for the optimal trading strategies show that risk-averse liquidity traders reduce their order sizes over time and execute a higher fraction of their total trading volume in early periods when price volatility increases or price sensitivity de
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Bibliographic InfoPaper provided by Yale School of Management in its series Yale School of Management Working Papers with number ysm165.
Date of creation: 01 Dec 2000
Date of revision: 01 Aug 2001
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