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 results of Almgren (2003) are based on the assumption that no shares of assets per unit of time are trade at the beginning of the period. We propose a general solution method that accomodates the case of a positive stock of assets in the initial period. Our findings 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 asset holdings in the initial period, the optimal execution time depends on trading activity at the beginning of the planning period.
|Date of creation:||29 Nov 2011|
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- Jones, C.M. & Lipson, M.L., 1999. "Execution Costs of Institutional Equity Orders," Papers 99-1, Columbia - Graduate School of Business.
- repec:cor:louvrp:2003 is not listed on IDEAS
- 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).
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- BOUCEKKINE, Raouf & RUIZ-TAMARIT, José 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).
- 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).
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