We consider an optimal execution problem in which a trader is looking at a short-term price predictive signal while trading. In the case where the trader is creating an instantaneous market impact, we show that transactions costs resulting from the optimal adaptive strategy are substantially lower than the corresponding costs of the optimal static strategy. Later, we investigate the case where the trader is creating transient market impact . We show that strategies in which the trader is observing the signal a number of times during the trading period, can dramatically reduce the transaction costs and improve the performance of the optimal static strategy . These results answer a question which was raised by Brigo and Piat 6%DIFDELCMD < ]%%% , by analyzing two cases where adaptive strategies can improve the performance of the execution .
We compare optimal static and dynamic solutions in trade execution. An optimal trade execution problem is considered where a trader is looking at a short-term price predictive signal while trading. When the trader creates an instantaneous market impact, it is shown that transaction costs of optimal adaptive strategies are substantially lower than the corresponding costs of the optimal static strategy. In the same spirit, in the case of transient impact it is shown that strategies that observe the signal a finite number of times can dramatically reduce the transaction costs and improve the performance of the optimal static strategy %DIFDELCMD < ]%%% .
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consider an optimal execution problem in which
compare optimal static and dynamic solutions in trade execution. An optimal trade execution problem is considered where
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In the case where the trader is creating
When the trader creates
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we show that transactions costs resulting from the optimal adaptive strategy
it is shown that transaction costs of optimal adaptive strategies
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Later, we investigate the case where the trader is creating transient market impact . We show that strategies in which the trader is observing the signal a
In the same spirit, in the case of transient impact it is shown that strategies that observe the signal a finite
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during the trading period,
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. These results answer a question which was raised by Brigo and Piat
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, by analyzing two cases where adaptive strategies can improve the performance of the execution