Optimal Trading Execution with Nonlinear Market Impact: An Alternative Solution Method
We consider the optimal trade execution strategies for a large portfolio of single stocks proposed by Almgren (2003). This framework accounts for a nonlinear impact of trades on average market prices. The execution strategy of Almgren (2003) is based on the assumption that no shares per unit of time are trade at the beginning of the period. We use a general solution method that accomodates the case of positive initial trades. Our results are twofold. First of all, we show that the problem admits a solution with no trading in the opening period only if additional parametric restrictions are imposed. Second, with positive initial trading, the optimal execution time depends on trading activity in the initial period.
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- BOUCEKKINE, Raouf & RUIZ-TAMARIT, Ramon, 2004.
"Special functions for the study of economic dynamics: The case of the Lucas-Uzawa model,"
CORE Discussion Papers
2004084, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Boucekkine, R. & Ruiz-Tamarit, J.R., 2008. "Special functions for the study of economic dynamics: The case of the Lucas-Uzawa model," Journal of Mathematical Economics, Elsevier, vol. 44(1), pages 33-54, January.
- Raouf, BOUCEKKINE & José R. , RUIZ-TAMARIT, 2004. "Special functions for the study of economic dynamics : The case of the Lucas-Uzawa model," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2004026, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
- BOUCEKKINE, Raouf & RUIZ-TAMARIT, JosÃ© Ramon, . "Special functions for the study of economic dynamics: The case of the Lucas-Uzawa model," CORE Discussion Papers RP 2003, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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- Hasbrouck, Joel & Seppi, Duane J., 2001. "Common factors in prices, order flows, and liquidity," Journal of Financial Economics, Elsevier, vol. 59(3), pages 383-411, March.
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