Execution uncertainty of dark pools and portfolio balance

Jianchang Zhu, Xuchu Sun and Tangrong Li

Finance Research Letters, 2024, vol. 63, issue C

Abstract: Execution uncertainty can disrupt portfolio balance; for example, dark pool orders for some assets in the portfolio are executed while others are not. To alleviate this problem, we consider a conditional dark pool order in a discrete model of the optimal portfolio execution strategy. Conditional dark pool orders allow an investor to submit a portfolio that will be executed only if the condition that all assets in the portfolio are executable is met. Additionally, dark pools are trading systems established for large transactions. We provide new insight into the puzzle of small average dark pool order size through portfolio balance.

Keywords: Optimal execution; Dark pool; Portfolio management (search for similar items in EconPapers)
JEL-codes: C61 G11 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:63:y:2024:i:c:s1544612324003064

DOI: 10.1016/j.frl.2024.105276

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