{"title":"执行风险下保留策略的最优订单执行","authors":"Xue Cheng, Peng Guo, Tai-ho Wang","doi":"arxiv-2401.03305","DOIUrl":null,"url":null,"abstract":"The paper addresses the problem of meta order execution from a\nbroker-dealer's point of view in Almgren-Chriss model under order fill\nuncertainty. A broker-dealer agency is authorized to execute an order of\ntrading on client's behalf. The strategies that the agent is allowed to deploy\nis subject to a benchmark, referred to as the reservation strategy, regulated\nby the client. We formulate the broker's problem as a utility maximization\nproblem in which the broker seeks to maximize his utility of excess\nprofit-and-loss at the execution horizon. Optimal strategy in feedback form is\nobtained in closed form. In the absence of execution risk, the optimal\nstrategies subject to reservation strategies are deterministic. We establish an\naffine structure among the trading trajectories under optimal strategies\nsubject to general reservation strategies using implementation shortfall and\ntarget close orders as basis. We conclude the paper with numerical experiments\nillustrating the trading trajectories as well as histograms of terminal wealth\nand utility at investment horizon under optimal strategies versus those under\nTWAP strategies.","PeriodicalId":501478,"journal":{"name":"arXiv - QuantFin - Trading and Market Microstructure","volume":"30 1","pages":""},"PeriodicalIF":0.0000,"publicationDate":"2024-01-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":"{\"title\":\"Optimal Order Execution subject to Reservation Strategies under Execution Risk\",\"authors\":\"Xue Cheng, Peng Guo, Tai-ho Wang\",\"doi\":\"arxiv-2401.03305\",\"DOIUrl\":null,\"url\":null,\"abstract\":\"The paper addresses the problem of meta order execution from a\\nbroker-dealer's point of view in Almgren-Chriss model under order fill\\nuncertainty. A broker-dealer agency is authorized to execute an order of\\ntrading on client's behalf. The strategies that the agent is allowed to deploy\\nis subject to a benchmark, referred to as the reservation strategy, regulated\\nby the client. We formulate the broker's problem as a utility maximization\\nproblem in which the broker seeks to maximize his utility of excess\\nprofit-and-loss at the execution horizon. Optimal strategy in feedback form is\\nobtained in closed form. In the absence of execution risk, the optimal\\nstrategies subject to reservation strategies are deterministic. We establish an\\naffine structure among the trading trajectories under optimal strategies\\nsubject to general reservation strategies using implementation shortfall and\\ntarget close orders as basis. We conclude the paper with numerical experiments\\nillustrating the trading trajectories as well as histograms of terminal wealth\\nand utility at investment horizon under optimal strategies versus those under\\nTWAP strategies.\",\"PeriodicalId\":501478,\"journal\":{\"name\":\"arXiv - QuantFin - Trading and Market Microstructure\",\"volume\":\"30 1\",\"pages\":\"\"},\"PeriodicalIF\":0.0000,\"publicationDate\":\"2024-01-06\",\"publicationTypes\":\"Journal Article\",\"fieldsOfStudy\":null,\"isOpenAccess\":false,\"openAccessPdf\":\"\",\"citationCount\":\"0\",\"resultStr\":null,\"platform\":\"Semanticscholar\",\"paperid\":null,\"PeriodicalName\":\"arXiv - QuantFin - Trading and Market Microstructure\",\"FirstCategoryId\":\"1085\",\"ListUrlMain\":\"https://doi.org/arxiv-2401.03305\",\"RegionNum\":0,\"RegionCategory\":null,\"ArticlePicture\":[],\"TitleCN\":null,\"AbstractTextCN\":null,\"PMCID\":null,\"EPubDate\":\"\",\"PubModel\":\"\",\"JCR\":\"\",\"JCRName\":\"\",\"Score\":null,\"Total\":0}","platform":"Semanticscholar","paperid":null,"PeriodicalName":"arXiv - QuantFin - Trading and Market Microstructure","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/arxiv-2401.03305","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"","JCRName":"","Score":null,"Total":0}
Optimal Order Execution subject to Reservation Strategies under Execution Risk
The paper addresses the problem of meta order execution from a
broker-dealer's point of view in Almgren-Chriss model under order fill
uncertainty. A broker-dealer agency is authorized to execute an order of
trading on client's behalf. The strategies that the agent is allowed to deploy
is subject to a benchmark, referred to as the reservation strategy, regulated
by the client. We formulate the broker's problem as a utility maximization
problem in which the broker seeks to maximize his utility of excess
profit-and-loss at the execution horizon. Optimal strategy in feedback form is
obtained in closed form. In the absence of execution risk, the optimal
strategies subject to reservation strategies are deterministic. We establish an
affine structure among the trading trajectories under optimal strategies
subject to general reservation strategies using implementation shortfall and
target close orders as basis. We conclude the paper with numerical experiments
illustrating the trading trajectories as well as histograms of terminal wealth
and utility at investment horizon under optimal strategies versus those under
TWAP strategies.