2021/12/07 by Julia Ackermann, Thomas Kruse, Ackermann, Julia +3
Economics, Econometrics and Finance · #Market Dynamics and Volatility #Monetary Policy and Economic Impact #Financial Markets and Investment Strategies
paper · pdf · doi:10.48550/arxiv.2112.03789
Most of the existing literature on optimal trade execution in limit order book models assumes that resilience is positive. But negative resilience also has a natural interpretation, as it models self-exciting behaviour of the price impact, where trading activities of the large investor stimulate other market participants to trade in the same direction. In the paper we discuss several new qualitative effects on optimal trade execution that arise when we allow resilience to take negative values. We do this in a framework where both market depth and resilience are stochastic processes.