An Optimal Execution Problem with a Geometric Ornstein-Uhlenbeck Price Process

@article{Kato2014AnOE,
  title={An Optimal Execution Problem with a Geometric Ornstein-Uhlenbeck Price Process},
  author={Takashi Kato},
  journal={Econometrics: Mathematical Methods \& Programming eJournal},
  year={2014}
}
  • Takashi Kato
  • Published 2014
  • Economics, Mathematics
  • Econometrics: Mathematical Methods & Programming eJournal
We study an optimal execution problem in the presence of market impact where the security price follows a geometric Ornstein-Uhlenbeck process, which implies the mean-reverting property, and show that the optimal strategy is a mixture of initial/terminal block liquidation and gradual intermediate liquidation. The mean-reverting property describes a price recovery effect that is strongly related to the resilience of market impact, as described in several papers that have studied optimal… Expand
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  • Takashi Kato
  • Mathematics, Computer Science
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