Optimal Liquidity Trading
We 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
|Date of creation:||01 Dec 2000|
|Date of revision:||01 Aug 2001|
|Contact details of provider:|| Web page: http://icf.som.yale.edu/|
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