Journal article

Authors list: Ackermann, Julia; Kruse, Thomas; Urusov, Mikhail

Publication year: 2021

Pages: 788-822

Journal: SIAM Journal on Financial Mathematics

Volume number: 12

Issue number: 2

ISSN: 1945-497X

Open access status: Green

DOI Link: https://doi.org/10.1137/20M135409X

Publisher: Society for Industrial and Applied Mathematics

Abstract: 
We analyze an optimal trade execution problem in a financial market with stochastic liquidity. To this end we set up a limit order book model in which both order book depth and resilience evolve randomly in time. Trading is allowed in both directions and at discrete points in time. We derive an explicit recursion that, under certain structural assumptions, characterizes minimal execution costs. We also discuss several qualitative aspects of optimal strategies, such as existence of profitable round trips or closing the position in one go, and compare our findings with the literature.

Harvard Citation style: Ackermann, J., Kruse, T. and Urusov, M. (2021) Optimal Trade Execution in an Order Book Model with Stochastic Liquidity Parameters, SIAM Journal on Financial Mathematics, 12(2), pp. 788-822. https://doi.org/10.1137/20M135409X

APA Citation style: Ackermann, J., Kruse, T., & Urusov, M. (2021). Optimal Trade Execution in an Order Book Model with Stochastic Liquidity Parameters. SIAM Journal on Financial Mathematics. 12(2), 788-822. https://doi.org/10.1137/20M135409X