Optimum Liquidation Problem Associated with the Poisson Cluster Process release_rxmr2plllzdudpxbmj2m62g2sy

by A. Sadoghi, J. Vecer

Released as a article .

2015  

Abstract

In this research, we develop a trading strategy for the discrete-time optimal liquidation problem of large order trading with different market microstructures in an illiquid market. In this framework, the flow of orders can be viewed as a point process with stochastic intensity. We model the price impact as a linear function of a self-exciting dynamic process. We formulate the liquidation problem as a discrete-time Markov Decision Processes, where the state process is a Piecewise Deterministic Markov Process (PDMP). The numerical results indicate that an optimal trading strategy is dependent on characteristics of the market microstructure. When no orders above certain value come the optimal solution takes offers in the lower levels of the limit order book in order to prevent not filling of orders and facing final inventory costs.
In text/plain format

Archived Files and Locations

application/pdf  670.1 kB
file_73zat7l6uzbv7bnkbthqauy22q
arxiv.org (repository)
web.archive.org (webarchive)
Read Archived PDF
Preserved and Accessible
Type  article
Stage   submitted
Date   2015-12-25
Version   v2
Language   en ?
arXiv  1507.06514v2
Work Entity
access all versions, variants, and formats of this works (eg, pre-prints)
Catalog Record
Revision: 91f3f72e-54b5-4ae2-b9f5-0fd419965af8
API URL: JSON