Optimal Execution with Transient Impact
21 Pages Posted: 2 Dec 2012 Last revised: 12 Jul 2014
Date Written: July 12, 2014
We consider the model of asset prices with transient impact as proposed in Gatheral (2008) and minimize the mean-variance functional of the execution cost. Using a non-classical result on calculus of variations, we obtain an integral equation characterizing the optimal strategy. The latter takes the form of a Fredholm integral equation of the second kind, we then provide a scheme to solve it numerically and verify indeed some no-arbitrage conditions.
Keywords: transient impact, optimal trading, JG model, mean-variance optimization
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