
Optimal Portfolio Liquidation with Limit Orders
Guéant, Olivier; Lehalle, Charles-Albert; Tapia, Joaquin Fernandez (2011), Optimal Portfolio Liquidation with Limit Orders. https://basepub.dauphine.fr/handle/123456789/7391
View/ Open
Type
Document de travail / Working paperDate
2011Publisher
Université Paris-Dauphine
Series title
Cahiers de la Chaire Finance et Développement DurableSeries number
44Published in
Paris
Pages
24
Metadata
Show full item recordAbstract (EN)
This paper addresses the optimal scheduling of the liquidation of a portfolio using a new angle. Instead of focusing only on the scheduling aspect like Almgren and Chriss in [ 2 ], or only on the liquidity-consuming orders like Obizhaeva and Wang in [ 31 ], we link the optimal trade-schedule to the price of the limit orders that have to be sent to the limit order book to optimally liquidate a portfolio. Most practitioners address these two issues separately: they compute an optimal trading curve and they then send orders to the markets to try to follow it. The results obtained here solve simultaneously the two problems. As in a previous paper that solved the “intra-day market making problem” [ 19], the interactions of limit orders with the market are modeled via a Poisson process pegged to a diffusive “fair price” and a Hamilton-Jacobi-Bellman equation is used to solve the trade-off between execution risk and price risk. Backtests are finally carried out to exemplify the use of our results.Subjects / Keywords
liquidation; PortfolioRelated items
Showing items related by title and author.
-
Guéant, Olivier; Lehalle, Charles-Albert; Tapia, Joaquin Fernandez (2011) Document de travail / Working paper
-
Fernandez-Tapia, Joaquin; Guéant, Olivier; Lasry, Jean-Michel (2017) Article accepté pour publication ou publié
-
Dang, Ngoc Minh; Lehalle, Charles-Albert; Bouchard, Bruno (2010) Communication / Conférence
-
Bouchard, Bruno; Dang, Ngoc Minh; Lehalle, Charles-Albert (2011) Article accepté pour publication ou publié
-
Cardaliaguet, Pierre; Lehalle, Charles-Albert (2017) Article accepté pour publication ou publié