Imperial College London
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ProfessorDamianoBrigo

Faculty of Natural Sciences, Department of Mathematics

Chair in Mathematical Finance
 
 
 
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Contact

 

damiano.brigo CV

 
 
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Location

 

805Weeks BuildingSouth Kensington Campus

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Summary

 

Publications

Citation

BibTex format

@inproceedings{Brigo:2018:10.1142/9789813272569_0010,
author = {Brigo, D and Piat, C},
doi = {10.1142/9789813272569_0010},
pages = {239--273},
publisher = {World Scientific Publishing Co.},
title = {Static vs adapted optimal execution strategies in two benchmark trading models},
url = {http://dx.doi.org/10.1142/9789813272569_0010},
year = {2018}
}
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RIS format (EndNote, RefMan)

TY  - CPAPER
AB  - We consider the optimal solutions to the trade execution problem in the two different classes of i) fully adapted or adaptive and ii) deterministic or static strategies, comparing them. We do this in two different benchmark models. The first model is a discrete time framework with an information flow process, dealing with both permanent and temporary impact, minimizing the expected cost of the trade. The second model is a continuous time framework where the objective function is the sum of the expected cost and a value at risk (or expected shortfall) type risk criterion. Optimal adapted solutions are known in both frameworks from the original works of Bertsimas and Lo (1998) and Gatheral and Schied (2011). In this paper we derive the optimal static strategies for both benchmark models and we study quantitatively the improvement in optimality when moving from static strategies to fully adapted ones. We conclude that, in the benchmark models we study, the difference is not relevant, except for extreme unrealistic cases for the model or impact parameters. This indirectly confirms that in the similar framework of Almgren and Chriss (2000) one is fine deriving a static optimal solution, as done by those authors, as opposed to a fully adapted one, since the static solution happens to be tractable and known in closed form.
AU  - Brigo,D
AU  - Piat,C
DO  - 10.1142/9789813272569_0010
EP  - 273
PB  - World Scientific Publishing Co.
PY  - 2018///
SP  - 239
TI  - Static vs adapted optimal execution strategies in two benchmark trading models
UR  - http://dx.doi.org/10.1142/9789813272569_0010
UR  - https://www.worldscientific.com/doi/abs/10.1142/9789813272569_0010
UR  - http://hdl.handle.net/10044/1/58309
ER  -
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