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VWAP execution and guaranteed VWAP

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  • Olivier Gu'eant
  • Guillaume Royer

Abstract

Optimal liquidation using VWAP strategies has been considered in the literature, though never in the presence of permanent market impact and only rarely with execution costs. Moreover, only VWAP strategies have been studied and the pricing of guaranteed VWAP contracts has never been addressed. In this article, we develop a model to price guaranteed VWAP contracts in a general framework for market impact and we highlight the differences between an agency VWAP and a guaranteed VWAP contract. Numerical methods and applications are also provided.

Suggested Citation

  • Olivier Gu'eant & Guillaume Royer, 2013. "VWAP execution and guaranteed VWAP," Papers 1306.2832, arXiv.org, revised May 2014.
    • Handle: RePEc:arx:papers:1306.2832
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    References listed on IDEAS

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    1. Bialkowski, Jedrzej & Darolles, Serge & Le Fol, Gaëlle, 2008. "Improving VWAP strategies: A dynamic volume approach," Journal of Banking & Finance, Elsevier, vol. 32(9), pages 1709-1722, September.
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    7. Dylan Possamai & Guillaume Royer & Nizar Touzi, 2013. "On the Robust superhedging of measurable claims," Papers 1302.1850, arXiv.org, revised Feb 2013.
    8. Humphery-Jenner, Mark L., 2011. "Optimal VWAP trading under noisy conditions," Journal of Banking & Finance, Elsevier, vol. 35(9), pages 2319-2329, September.
    9. James McCulloch & Vladimir Kazakov, 2007. "Optimal VWAP Trading Strategy and Relative Volume," Research Paper Series 201, Quantitative Finance Research Centre, University of Technology, Sydney.
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    Citations

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    Cited by:

    1. Victor Olkhov, 2021. "Three Remarks On Asset Pricing," Papers 2105.13903, arXiv.org, revised Jan 2024.
    2. Frei, Christoph & Mitra, Joshua, 2021. "Optimal closing benchmarks," Finance Research Letters, Elsevier, vol. 40(C).
    3. Alexander Barzykin & Fabrizio Lillo, 2019. "Optimal VWAP execution under transient price impact," Papers 1901.02327, arXiv.org, revised Jan 2019.
    4. Olkhov, Victor, 2020. "Volatility Depend on Market Trades and Macro Theory," MPRA Paper 102434, University Library of Munich, Germany.
    5. Olkhov, Victor, 2020. "Classical Option Pricing and Some Steps Further," MPRA Paper 99918, University Library of Munich, Germany.
    6. Olkhov, Victor, 2021. "To VaR, or Not to VaR, That is the Question," MPRA Paper 105458, University Library of Munich, Germany.
    7. Olivier Guéant, 2016. "The Financial Mathematics of Market Liquidity: From Optimal Execution to Market Making," Post-Print hal-01393136, HAL.
    8. Takashi Kato, 2017. "An Optimal Execution Problem in the Volume-Dependent Almgren-Chriss Model," Papers 1701.08972, arXiv.org, revised Aug 2017.
    9. Fayc{c}al Drissi, 2022. "Solvability of Differential Riccati Equations and Applications to Algorithmic Trading with Signals," Papers 2202.07478, arXiv.org, revised Aug 2023.
    10. Christopher Kath & Florian Ziel, 2020. "Optimal Order Execution in Intraday Markets: Minimizing Costs in Trade Trajectories," Papers 2009.07892, arXiv.org, revised Oct 2020.
    11. Philippe Bergault & Fayc{c}al Drissi & Olivier Gu'eant, 2021. "Multi-asset optimal execution and statistical arbitrage strategies under Ornstein-Uhlenbeck dynamics," Papers 2103.13773, arXiv.org, revised Mar 2022.
    12. Simon Clinet & Jean-Franc{c}ois Perreton & Serge Reydellet, 2021. "Optimal trading: a model predictive control approach," Papers 2110.11008, arXiv.org, revised Nov 2021.

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