IDEAS home Printed from https://ideas.repec.org/p/arx/papers/1306.2832.html
   My bibliography  Save this paper

VWAP execution and guaranteed VWAP

Author

Listed:
  • Olivier Gu'eant
  • Guillaume Royer

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.

Suggested Citation

  • Olivier Gu'eant & Guillaume Royer, 2013. "VWAP execution and guaranteed VWAP," Papers 1306.2832, arXiv.org, revised May 2014.
    • Handle: RePEc:arx:papers:1306.2832
    as

    Download full text from publisher

    File URL: http://arxiv.org/pdf/1306.2832
    File Function: Latest version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Bialkowski, Jedrzej & Darolles, Serge & Le Fol, Gaëlle, 2008. "Improving VWAP strategies: A dynamic volume approach," Journal of Banking & Finance, Elsevier, vol. 32(9), pages 1709-1722, September.
    2. James McCulloch, 2007. "Relative volume as a doubly stochastic binomial point process," Quantitative Finance, Taylor & Francis Journals, vol. 7(1), pages 55-62.
    3. Konishi, Hizuru, 2002. "Optimal slice of a VWAP trade," Journal of Financial Markets, Elsevier, vol. 5(2), pages 197-221, April.
    4. Schweizer, Martin, 1995. "Approximation Pricing and the Variance-Optimal Martingale Measure," Discussion Paper Serie B 336, University of Bonn, Germany.
    5. Bruno Bouchard & Ngoc-Minh Dang, 2013. "Generalized stochastic target problems for pricing and partial hedging under loss constraints—application in optimal book liquidation," Finance and Stochastics, Springer, vol. 17(1), pages 31-72, January.
    6. Alexander Schied & Torsten Schoneborn & Michael Tehranchi, 2010. "Optimal Basket Liquidation for CARA Investors is Deterministic," Applied Mathematical Finance, Taylor & Francis Journals, vol. 17(6), pages 471-489.
    7. Dylan Possamai & Guillaume Royer & Nizar Touzi, 2013. "On the Robust superhedging of measurable claims," Papers 1302.1850, arXiv.org, revised Feb 2013.
    8. Humphery-Jenner, Mark L., 2011. "Optimal VWAP trading under noisy conditions," Journal of Banking & Finance, Elsevier, vol. 35(9), pages 2319-2329, September.
    9. James McCulloch & Vladimir Kazakov, 2007. "Optimal VWAP Trading Strategy and Relative Volume," Research Paper Series 201, Quantitative Finance Research Centre, University of Technology, Sydney.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Takashi Kato, 2017. "An Optimal Execution Problem in the Volume-Dependent Almgren-Chriss Model," Papers 1701.08972, arXiv.org, revised Aug 2017.
    2. Olkhov, Victor, 2020. "Classical Option Pricing and Some Steps Further," MPRA Paper 105431, University Library of Munich, Germany, revised 28 Dec 2020.
    3. Victor Olkhov, 2021. "Three Remarks On Asset Pricing," Papers 2105.13903, arXiv.org, revised Jan 2024.
    4. Fayc{c}al Drissi, 2022. "Solvability of Differential Riccati Equations and Applications to Algorithmic Trading with Signals," Papers 2202.07478, arXiv.org, revised Aug 2023.
    5. Frei, Christoph & Mitra, Joshua, 2021. "Optimal closing benchmarks," Finance Research Letters, Elsevier, vol. 40(C).
    6. Victor Olkhov, 2020. "Volatility Depends on Market Trades and Macro Theory," Papers 2008.07907, arXiv.org, revised Jun 2024.
    7. Alexander Barzykin & Fabrizio Lillo, 2019. "Optimal VWAP execution under transient price impact," Papers 1901.02327, arXiv.org, revised Jan 2019.
    8. Christopher Kath & Florian Ziel, 2020. "Optimal Order Execution in Intraday Markets: Minimizing Costs in Trade Trajectories," Papers 2009.07892, arXiv.org, revised Oct 2020.
    9. Victor Olkhov, 2021. "To VaR, or Not to VaR, That is the Question," Papers 2101.08559, arXiv.org, revised Apr 2024.
    10. Philippe Bergault & Fayc{c}al Drissi & Olivier Gu'eant, 2021. "Multi-asset optimal execution and statistical arbitrage strategies under Ornstein-Uhlenbeck dynamics," Papers 2103.13773, arXiv.org, revised Mar 2022.
    11. Simon Clinet & Jean-Franc{c}ois Perreton & Serge Reydellet, 2021. "Optimal trading: a model predictive control approach," Papers 2110.11008, arXiv.org, revised Nov 2021.
    12. Olivier Guéant, 2016. "The Financial Mathematics of Market Liquidity: From Optimal Execution to Market Making," Post-Print hal-01393136, HAL.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Olivier Guéant & Royer Guillaume, 2014. "VWAP execution and guaranteed VWAP," Post-Print hal-01393121, HAL.
    2. Olivier Guéant, 2016. "The Financial Mathematics of Market Liquidity: From Optimal Execution to Market Making," Post-Print hal-01393136, HAL.
    3. Christopher Kath & Florian Ziel, 2020. "Optimal Order Execution in Intraday Markets: Minimizing Costs in Trade Trajectories," Papers 2009.07892, arXiv.org, revised Oct 2020.
    4. Enzo Busseti & Stephen Boyd, 2015. "Volume Weighted Average Price Optimal Execution," Papers 1509.08503, arXiv.org.
    5. Roman Huptas, 2019. "Point forecasting of intraday volume using Bayesian autoregressive conditional volume models," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 38(4), pages 293-310, July.
    6. Seung Hwan Jeong & Hee Soo Lee & Hyun Nam & Kyong Joo Oh, 2021. "Using a Genetic Algorithm to Build a Volume Weighted Average Price Model in a Stock Market," Sustainability, MDPI, vol. 13(3), pages 1-16, January.
    7. Francesco Calvori & Fabrizio Cipollini & Giampiero M. Gallo, 2014. "Go with the Flow: A GAS model for Predicting Intra-daily Volume Shares," Econometrics Working Papers Archive 2014_01, Universita' degli Studi di Firenze, Dipartimento di Statistica, Informatica, Applicazioni "G. Parenti", revised Feb 2014.
    8. Bialkowski, Jedrzej & Darolles, Serge & Le Fol, Gaëlle, 2008. "Improving VWAP strategies: A dynamic volume approach," Journal of Banking & Finance, Elsevier, vol. 32(9), pages 1709-1722, September.
    9. Ye Xunyu & Yan Rui & Li Handong, 2014. "Forecasting trading volume in the Chinese stock market based on the dynamic VWAP," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 18(2), pages 125-144, April.
    10. James McCulloch & Vladimir Kazakov, 2007. "Optimal VWAP Trading Strategy and Relative Volume," Research Paper Series 201, Quantitative Finance Research Centre, University of Technology, Sydney.
    11. Jedrzej Bialkowski & Serge Darolles & Gaëlle Le Fol, 2012. "Reducing the risk of VWAP orders execution - A new approach to modeling intra-day volume," Post-Print hal-01632822, HAL.
    12. Szűcs, Balázs Árpád, 2017. "Forecasting intraday volume: Comparison of two early models," Finance Research Letters, Elsevier, vol. 21(C), pages 249-258.
    13. Humphery-Jenner, M., 2011. "High Frequency Trading, Information, and Takeovers," Other publications TiSEM 30aa1477-0fb2-46ed-a5eb-f, Tilburg University, School of Economics and Management.
    14. Humphery-Jenner, M., 2011. "High Frequency Trading, Information, and Takeovers," Other publications TiSEM 0e6dd147-6f57-4f32-b265-f, Tilburg University, School of Economics and Management.
    15. Dutt, Tanuj & Humphery-Jenner, Mark, 2013. "Stock return volatility, operating performance and stock returns: International evidence on drivers of the ‘low volatility’ anomaly," Journal of Banking & Finance, Elsevier, vol. 37(3), pages 999-1017.
    16. Humphery-Jenner, M., 2011. "High Frequency Trading, Information, and Takeovers," Discussion Paper 2011-047, Tilburg University, Center for Economic Research.
    17. Alexander Buryak & Ivan Guo, 2014. "Effective and simple VWAP option pricing model," Papers 1407.7315, arXiv.org.
    18. Philippe Bergault & Fayc{c}al Drissi & Olivier Gu'eant, 2021. "Multi-asset optimal execution and statistical arbitrage strategies under Ornstein-Uhlenbeck dynamics," Papers 2103.13773, arXiv.org, revised Mar 2022.
    19. Qixuan Luo & Yu Shi & Xuan Zhou & Handong Li, 2021. "Research on the Effects of Institutional Liquidation Strategies on the Market Based on Multi-agent Model," Computational Economics, Springer;Society for Computational Economics, vol. 58(4), pages 1025-1049, December.
    20. Wang, Kaiyang & Yang, Haizhen, 2018. "The price-volume relationship caused by asset allocation based on Kelly criterion," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 503(C), pages 1-8.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arx:papers:1306.2832. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: arXiv administrators (email available below). General contact details of provider: http://arxiv.org/ .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.