Exact solutions for optimal execution of portfolios transactions and the Riccati equation

Juan M. Romero and Jorge Bautista

Papers from arXiv.org

Abstract: We propose two methods to obtain exact solutions for the Almgren-Chriss model about optimal execution of portfolio transactions. In the first method we rewrite the Almgren-Chriss equation and find two exact solutions. In the second method, employing a general reparametrized time, we show that the Almgren-Chriss equation can be reduced to some known equations which can be exactly solved in different cases.For this last case we obtain a quantity conserved. In addition, we show that in both methods the Almgren-Chriss equation is equivalent to a Riccati equation.

Date: 2016-01
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