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Quantitative Finance > Trading and Market Microstructure

Title: Optimal liquidity-based trading tactics

Abstract: We consider an agent who needs to buy (or sell) a relatively small amount of asset over some fixed short time interval. We work at the highest frequency meaning that we wish to find the optimal tactic to execute our quantity using limit orders, market orders and cancellations. To solve the agent's control problem, we build an order book model and optimize an expected utility function based on our price impact. We derive the equations satisfied by the optimal strategy and solve them numerically. Moreover, we show that our optimal tactic enables us to outperform significantly naive execution strategies.
Subjects: Trading and Market Microstructure (q-fin.TR)
Cite as: arXiv:1803.05690 [q-fin.TR]
  (or arXiv:1803.05690v1 [q-fin.TR] for this version)

Submission history

From: Othmane Mounjid [view email]
[v1] Thu, 15 Mar 2018 10:58:52 GMT (1408kb,D)