Optimal algorithmic trading and market microstructure

Report, Preprint OPEN
Labadie , Mauricio; Lehalle , Charles-Albert;
(2010)
  • Publisher: HAL CCSD
  • Subject: systematic trading | market microstructure | [ QFIN.PM ] Quantitative Finance [q-fin]/Portfolio Management [q-fin.PM] | [ QFIN.TR ] Quantitative Finance [q-fin]/Trading and Market Microstructure [q-fin.TR] | optimal trading | algorithmic trading | [ QFIN.CP ] Quantitative Finance [q-fin]/Computational Finance [q-fin.CP] | quantitative finance,optimal trading,algorithmic trading,systematic trading,market microstructure | quantitative finance
    arxiv: Computer Science::Computational Engineering, Finance, and Science

The efficient frontier is a core concept in Modern Portfolio Theory. Based on this idea, we will construct optimal trading curves for different types of portfolios. These curves correspond to the algorithmic trading strategies that minimize the expected transaction cost... View more
  • References (19)
    19 references, page 1 of 2

    6.1 Optimal trading curves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

    6.1.1 Recursive algorithms and shooting method . . . . . . . . . . . . . . . . . 35

    6.1.2 Dynamic programming and optimal control . . . . . . . . . . . . . . . . . 35

    6.1.3 Nonlinear transaction costs . . . . . . . . . . . . . . . . . . . . . . . . . . 36

    6.2 Normal returns vs real returns: stylized facts . . . . . . . . . . . . . . . . . . . . 36

    6.3 Some alternative models in Economics and Finance . . . . . . . . . . . . . . . . . 37

    6.3.1 GARCH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

    6.3.2 Levy distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

    6.3.3 Student distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

    6.3.4 Fractional Brownian motion . . . . . . . . . . . . . . . . . . . . . . . . . . 39

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