Recurrent Neural Networks for Dynamic VWAP Execution: Adaptive Trading Strategies with Temporal Kolmogorov-Arnold Networks

Rémi Genet ()
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Rémi Genet: DRM - Dauphine Recherches en Management - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique

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Abstract: The execution of Volume Weighted Average Price (VWAP) orders remains a critical challenge in modern financial markets, particularly as trading volumes and market complexity continue to increase. In my previous work [1], I introduced a novel deep learning approach that demonstrated significant improvements over traditional VWAP execution methods by directly optimizing the execution problem rather than relying on volume curve predictions. However, that model was static because it employed the fully linear approach described in [2], which is not designed for dynamic adjustment. This paper extends that foundation by developing a dynamic neural VWAP framework that adapts to evolving market conditions in real time. We introduce two key innovations: first, the integration of recurrent neural networks to capture complex temporal dependencies in market dynamics, and second, a sophisticated dynamic adjustment mechanism that continuously optimizes execution decisions based on market feedback. The empirical analysis, conducted across five major cryptocurrency markets, demonstrates that this dynamic approach achieves substantial improvements over both traditional methods and our previous static implementation, with execution performance gains of 10-15% in liquid markets and consistent outperformance across varying conditions. These results suggest that adaptive neural architectures can effectively address the challenges of modern VWAP execution while maintaining computational efficiency suitable for practical deployment.

Keywords: VWAP; RNN; Deep Learning; TKAN; Optimal Execution (search for similar items in EconPapers)
Date: 2025-02-25
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Persistent link: https://EconPapers.repec.org/RePEc:hal:wpaper:hal-05433511

DOI: 10.2139/ssrn.5161201

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