Economy – Quantitative Finance – Trading and Market Microstructure
Scientific paper
2011-11-29
Economy
Quantitative Finance
Trading and Market Microstructure
14 pages
Scientific paper
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.
Marzo Massimiliano
Ritelli Daniele
Zagaglia Paolo
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