Liquidation in Limit Order Books with Controlled Intensity

@article{Bayraktar2011LiquidationIL,
  title={Liquidation in Limit Order Books with Controlled Intensity},
  author={Erhan Bayraktar and Michael Ludkovski},
  journal={CoRR},
  year={2011},
  volume={abs/1105.0247}
}
We consider a framework for solving optimal liquidation problems in limit order books. In particular, order arrivals are modeled as a point process whose intensity depends on the liquidation price. We set up a stochastic control problem in which the goal is to maximize the expected revenue from liquidating the entire position held. We solve this optimal liquidation problem for power-law and exponential-decay order book models explicitly and discuss several extensions. We also consider the… CONTINUE READING
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