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Optimal Execution Strategy in Liquidity Framework Under Exponential Temporary Market Impact

In: Handbook of Recent Advances in Commodity and Financial Modeling

Author

Listed:
  • Chiara Benazzoli

    (University of Trento)

  • Luca Di Persio

    (University of Verona)

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.

Suggested Citation

  • Chiara Benazzoli & Luca Di Persio, 2018. "Optimal Execution Strategy in Liquidity Framework Under Exponential Temporary Market Impact," International Series in Operations Research & Management Science, in: Giorgio Consigli & Silvana Stefani & Giovanni Zambruno (ed.), Handbook of Recent Advances in Commodity and Financial Modeling, chapter 0, pages 251-265, Springer.
    • Handle: RePEc:spr:isochp:978-3-319-61320-8_12
    DOI: 10.1007/978-3-319-61320-8_12
    as

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