2012/10/23 by Olivier Guéant, Guéant, Olivier
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 · doi:10.48550/arxiv.1210.6372
openalex publication_date 2012/10/23 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28
In this article, we develop a general framework to study optimal execution and to price block trades. We prove existence of optimal liquidation strategies and we provide regularity results for optimal strategies under very general hypotheses. We exhibit a Hamiltonian characterization for the optimal strategy that can be used for numerical approximation. We also focus on the important topic of block trade pricing and we propose a methodology to give a price to financial (il)liquidity. In particular, we provide a closed-form formula for the price of a block trade when there is no time constraint to liquidate.