Execution and Block Trade Pricing with Optimal Constant Rate of Participation

@article{Guant2012ExecutionAB,
  title={Execution and Block Trade Pricing with Optimal Constant Rate of Participation},
  author={Olivier Gu{\'e}ant},
  journal={Journal of Mathematical Finance},
  year={2012},
  volume={4},
  pages={255-264}
}
  • Olivier Guéant
  • Published 2012
  • Economics, Business
  • Journal of Mathematical Finance
  • In this article, we develop a liquidation model in which the trader is constrained to liquidate a portfolio at a constant participation rate. Considering the functional forms usually used by practitioners, we obtain a closed-form expression for the optimal participation rate and for the liquidity premium a trader should quote to buy a large block. We also show that the difference in terms of liquidity premium between the constant participation rate case and the usual Almgren-Chriss-like case… CONTINUE READING

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