Optimal Execution Strategy in Liquidity Framework Under Exponential Temporary Market Impact

Chiara Benazzoli () and Luca Di Persio ()
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Chiara Benazzoli: University of Trento
Luca Di Persio: University of Verona

Chapter Chapter 12 in Handbook of Recent Advances in Commodity and Financial Modeling, 2018, pp 251-265 from Springer

Abstract: Abstract In the present work we compute the optimal liquidation strategy for an investor who intends to entirely extinguish his position in an illiquid asset so as to minimize a criterion involving mean and variance of the strategies implementation shortfall. The market impact due to illiquidity is modeled by splitting it into two different component, namely the permanent market impact, which is assumed to be linear in the rate of trading, and the temporary market impact, which follows an exponential-type function.

Keywords: Stochastic mean-variance optimization; Non-liquid markets; Non linear market impact factors; Lambert function (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:spr:isochp:978-3-319-61320-8_12

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DOI: 10.1007/978-3-319-61320-8_12

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