Optimal execution and price manipulations in time-varying limit order books

Aurélien Alfonsi () and José Infante Acevedo
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Aurélien Alfonsi: CERMICS - Centre d'Enseignement et de Recherche en Mathématiques et Calcul Scientifique - ENPC - École nationale des ponts et chaussées, MATHRISK - Mathematical Risk handling - Inria Paris-Rocquencourt - Inria - Institut National de Recherche en Informatique et en Automatique - UPEM - Université Paris-Est Marne-la-Vallée - ENPC - École nationale des ponts et chaussées
José Infante Acevedo: CERMICS - Centre d'Enseignement et de Recherche en Mathématiques et Calcul Scientifique - ENPC - École nationale des ponts et chaussées

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Abstract: This paper focuses on an extension of the Limit Order Book (LOB) model with general shape introduced by Alfonsi, Fruth and Schied. Here, the additional feature allows a time-varying LOB depth. We solve the optimal execution problem in this framework for both discrete and continuous time strategies. This gives in particular sufficient conditions to exclude Price Manipulations in the sense of Huberman and Stanzl or Transaction-Triggered Price Manipulations (see Alfonsi, Schied and Slynko). These conditions give interesting qualitative insights on how market makers may create or not price manipulations.

Date: 2014
New Economics Papers: this item is included in nep-mst
Note: View the original document on HAL open archive server: https://enpc.hal.science/hal-00687193v1
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Citations: View citations in EconPapers (6)

Published in Applied Mathematical Finance, 2014, http://www.tandfonline.com/doi/abs/10.1080/1350486X.2013.845471#.VMpSGGNxNhg. ⟨10.1080/1350486X.2013.845471⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00687193

DOI: 10.1080/1350486X.2013.845471

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