2020/07/05 by David Marcos, Marcos, David
Economics, Econometrics and Finance · #Economic theories and models #FOS: Economics and business #Financial Markets and Investment Strategies #Stochastic processes and financial applications #Trading and Market Microstructure (q-fin.TR)
paper · pdf · doi:10.48550/arxiv.2007.07998
openalex publication_date 2020/07/05 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28
In the present work we develop a formalism to tackle the problem of optimal execution when trading market securities. More precisely, we introduce a utility function that balances market impact and timing risk, with this last being modelled as the very negative transaction costs incurred by our order execution. The framework is built upon existing theory on optimal trading strategies, but incorporates characteristics that enable distinctive execution strategies. The formalism is complemented by an analysis of various impact models and different distributional properties of market returns.