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Periodic strategies in optimal execution with multiplicative price impact

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  • Daniel Hernández‐Hernández
  • Harold A. Moreno‐Franco
  • José‐Luis Pérez

Abstract

We study the optimal execution problem with multiplicative price impact in algorithmic trading, when an agent holds an initial position of shares of a financial asset. The interselling decision times are modeled by the arrival times of a Poisson process. The criterion to be optimized consists in maximizing the expected net present value of the 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 the asset price.

Suggested Citation

  • Daniel Hernández‐Hernández & Harold A. Moreno‐Franco & José‐Luis Pérez, 2019. "Periodic strategies in optimal execution with multiplicative price impact," Mathematical Finance, Wiley Blackwell, vol. 29(4), pages 1039-1065, October.
    • Handle: RePEc:bla:mathfi:v:29:y:2019:i:4:p:1039-1065
    DOI: 10.1111/mafi.12208
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    Cited by:

    1. Yan, Tingjin & Chiu, Mei Choi & Wong, Hoi Ying, 2023. "Portfolio liquidation with delayed information," Economic Modelling, Elsevier, vol. 126(C).

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