Mathematical Aspects of Delayed Market Clearing in Order Driven Markets and its Applications to Non-Markovian Price Impact and Optimal Execution

2015 ◽  
Author(s):  
Julius Bonart
Keyword(s):  
Price Impact ◽  
Market Clearing ◽  
Optimal Execution

scholarly journals Optimal Execution considering Trading Signal and Execution Risk Simultaneously

2021 ◽  
Vol 2021 ◽  
pp. 1-12
Author(s):  
Yuan Cheng ◽  
Lan Wu
Keyword(s):  
Kernel Function ◽  
Price Impact ◽  
Value Functions ◽  
Feedback Form ◽  
Bellman Equations ◽  
Impact Function ◽  
Optimal Execution ◽  
Dirac Function ◽  
Hamilton Jacobi Bellman ◽  
Optimal Execution Problem

In this paper, we study the optimal execution problem by considering the trading signal and the transaction risk simultaneously. We propose an optimal execution problem by taking into account the trading signal and the execution risk with the associated decay kernel function and the transient price impact function being of generalized forms. In particular, we solve the stochastic optimal control problems under the assumptions that the decay kernel function is the Dirac function and the transient price function is a linear function. We give the optimal executing strategies in state-feedback form and the Hamilton‐Jacobi‐Bellman equations that the corresponding value functions satisfy in the cases of a constant execution risk and a linear execution risk. We also demonstrate that our results can recover previous results when the process of the trading signal degenerates.

scholarly journals Periodic strategies in optimal execution with multiplicative price impact

2019 ◽  
Vol 29 (4) ◽  
pp. 1039-1065
Author(s):  
Daniel Hernández‐Hernández ◽  
Harold A. Moreno‐Franco ◽  
José‐Luis Pérez
Keyword(s):  
Price Impact ◽  
Optimal Execution

Optimal execution under jump models for uncertain price impact

2013 ◽  
Vol 16 (4) ◽  
pp. 35-78 ◽  
Author(s):  
Somayeh Moazeni ◽  
Thomas Coleman ◽  
Yuying Li
Keyword(s):  
Price Impact ◽  
Optimal Execution

scholarly journals Exchange Design and Efficiency

Econometrica ◽  
2021 ◽  
Vol 89 (6) ◽  
pp. 2887-2928
Author(s):  
Marzena Rostek ◽  
Ji Hee Yoon
Keyword(s):  
Risk Sharing ◽  
Price Impact ◽  
Competitive Market ◽  
Double Auction ◽  
Market Clearing ◽  
Uniform Price ◽  
Loss Of Information ◽  
Model Based

Most assets clear independently rather than jointly. This paper presents a model based on the uniform‐price double auction which accommodates arbitrary restrictions on market clearing, including independent clearing across assets (allowed when demand for each asset is contingent only on the price of that asset) and joint market clearing for all assets (required when demand for each asset is contingent on the prices of all assets). Additional trading protocols for traded assets—neutral when the market clears jointly—are generally not redundant innovations, even if all traders participate in all protocols. Multiple trading protocols that clear independently can be designed to be at least as efficient as joint market clearing for all assets. The change in price impact brought by independence in market clearing can overcome the loss of information, and enhance diversification and risk sharing. Except when the market is competitive, market characteristics should guide innovation in trading technology.

scholarly journals The Short-Term Price Impact of Trades is Universal

2017 ◽  
Vol 03 (02) ◽  
pp. 1850002 ◽  
Author(s):  
Bence Tóth ◽  
Zoltán Eisler ◽  
Jean-Philippe Bouchaud
Keyword(s):  
Time Dependence ◽  
Time Scales ◽  
Electronic Markets ◽  
Price Impact ◽  
Order Flow ◽  
Short Term ◽  
Market Participants ◽  
Significant Difference ◽  
Optimal Execution ◽  
Short Time

We analyze a proprietary dataset of trades by a single asset manager, comparing their price impact with that of the trades of the rest of the market. In the context of a linear propagator model, we find no significant difference between the two, suggesting that both the magnitude and time dependence of impact are universal in anonymous, electronic markets. This result is important as optimal execution policies often rely on propagators calibrated on anonymous data. We also find evidence that in the wake of a trade, the order flow of other market participants first adds further copy-cat trades enhancing price impact on very short time scales. The induced order flow then quickly inverts, thereby contributing to impact decay.

scholarly journals Optimal Execution in a Multiplayer Model of Transient Price Impact

2017 ◽  
Vol 03 (03n04) ◽  
pp. 1850007 ◽  
Author(s):  
Elias Strehle
Keyword(s):  
Nash Equilibrium ◽  
Transaction Costs ◽  
Closed Form ◽  
Exponential Decay ◽  
Existence And Uniqueness ◽  
Price Impact ◽  
Execution Costs ◽  
Large Order ◽  
Optimal Execution ◽  
Form Representation

Trading algorithms that execute large orders are susceptible to exploitation by order anticipation strategies. This paper studies the influence of order anticipation strategies in a multi-investor model of optimal execution under transient price impact. Existence and uniqueness of a Nash equilibrium is established under the assumption that trading incurs quadratic transaction costs. A closed-form representation of the Nash equilibrium is derived for exponential decay kernels. With this representation, it is shown that while order anticipation strategies raise the execution costs of a large order significantly, they typically do not cause price overshooting in the sense of Brunnermeier and Pedersen.

Optimal Execution with Multiplicative Price Impact

2015 ◽  
Vol 6 (1) ◽  
pp. 281-306 ◽  
Author(s):  
Xin Guo ◽  
Mihail Zervos
Keyword(s):  
Price Impact ◽  
Optimal Execution
Sign in / Sign up

Export Citation Format

Share Document