Dynamic optimal execution in a mixed-market-impact Hawkes price model - École des Ponts ParisTech Access content directly
Journal Articles Finance and Stochastics Year : 2016

Dynamic optimal execution in a mixed-market-impact Hawkes price model

Abstract

We study a linear price impact model including other liquidity takers, whose flow of orders either follows a Poisson or a Hawkes process. The optimal execution problem is solved explicitly in this context, and the closed-formula optimal strategy describes in particular how one should react to the orders of other traders. This result enables us to discuss the viability of the market. It is shown that Poissonian arrivals of orders lead to quite robust Price Manipulation Strategies in the sense of Huberman and Stanzl. Instead, a particular set of conditions on the Hawkes model balances the self-excitation of the order flow with the resilience of the price, excludes Price Manipulation Strategies and gives some market stability.
Fichier principal
Vignette du fichier
Hawkes_MI_FS_20140915.pdf (392.85 Ko) Télécharger le fichier
Origin : Files produced by the author(s)

Dates and versions

hal-00971369 , version 1 (02-04-2014)
hal-00971369 , version 2 (09-06-2015)

Identifiers

Cite

Aurélien Alfonsi, Pierre Blanc. Dynamic optimal execution in a mixed-market-impact Hawkes price model. Finance and Stochastics, 2016, ⟨10.1007/s00780-015-0282-y⟩. ⟨hal-00971369v2⟩
550 View
946 Download

Altmetric

Share

Gmail Facebook X LinkedIn More