Optimal Trading Execution with Nonlinear Market Impact: An Alternative Solution Method

Massimiliano Marzo, Daniele Ritelli and Paolo Zagaglia

Working Papers from Dipartimento Scienze Economiche, Universita' di Bologna

Abstract: We consider the optimal trade execution strategies for a large portfolio of single stocks proposed by Almgren (2003). This framework accounts for a nonlinear impact of trades on average market prices. The execution strategy of Almgren (2003) is based on the assumption that no shares per unit of time are trade at the beginning of the period. We use a general solution method that accomodates the case of positive initial trades. Our results are twofold. First of all, we show that the problem admits a solution with no trading in the opening period only if additional parametric restrictions are imposed. Second, with positive initial trading, the optimal execution time depends on trading activity in the initial period.

JEL-codes: G11 G12 (search for similar items in EconPapers)
Date: 2011-11
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://amsacta.unibo.it/4441/1/WP797.pdf (application/pdf)

Related works:
Working Paper: Optimal Trading Execution with Nonlinear Market Impact: An Alternative Solution Method (2011)
Working Paper: Optimal trading execution with nonlinear market impact: an alternative solution method (2011)
Working Paper: Optimal Trading Execution with Nonlinear Market Impact: An Alternative Solution Method (2011)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bol:bodewp:wp797

Access Statistics for this paper

More papers in Working Papers from Dipartimento Scienze Economiche, Universita' di Bologna Contact information at EDIRC.
Bibliographic data for series maintained by Dipartimento Scienze Economiche, Universita' di Bologna ().