Dynamical Models of Market Impact and Algorithms for Order Execution
Baruch College, CUNY
University of Mannheim
January 24, 2013
HANDBOOK ON SYSTEMIC RISK, Jean-Pierre Fouque, Joseph A. Langsam, eds., pp. 579-599, Cambridge, 2013
In this review article, we present recent work on the regularity of dynamical market impact models and their associated optimal order execution strategies. In particular, we address the question of the stability and existence of optimal strategies, showing that in a large class of models, there is price manipulation and no well-behaved optimal order execution strategy. We also address issues arising from the use of dark pools and predatory trading.
Number of Pages in PDF File: 23
Keywords: Market impact model, optimal order execution, algorithmic trading, price manipulation, transaction-triggered price manipulationAccepted Paper Series
Date posted: April 5, 2012 ; Last revised: September 4, 2013
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