In the present work we compute the optimal liquidation strategy for an investor who intends to entirely extinguish his position in an illiquid asset so as to minimize a criterion involving mean and variance of the strategies implementation shortfall. The market impact due to illiquidity is modeled by splitting it into two different component, namely the permanent market impact, which is assumed to be linear in the rate of trading, and the temporary market impact, which follows an exponential-type function.

Optimal Execution Strategy in Liquidity Framework Under Exponential Temporary Market Impact

BENAZZOLI, Chiara;DI PERSIO, Luca
2018

Abstract

In the present work we compute the optimal liquidation strategy for an investor who intends to entirely extinguish his position in an illiquid asset so as to minimize a criterion involving mean and variance of the strategies implementation shortfall. The market impact due to illiquidity is modeled by splitting it into two different component, namely the permanent market impact, which is assumed to be linear in the rate of trading, and the temporary market impact, which follows an exponential-type function.
978-3-319-61318-5
Non linear market impact factors
Stochastic mean-variance optimization
Non-liquid markets
Lambert function
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11562/968841
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