Optimal Multi-Asset Trading With Linear Costs: A Mean-Field Approach

  title={Optimal Multi-Asset Trading With Linear Costs: A Mean-Field Approach},
  author={Matt Emschwiller and Benjamin Petit and Jean-Philippe Bouchaud},
  journal={ERN: Other Econometric Modeling: Capital Markets - Asset Pricing (Topic)},
Optimal multi-asset trading with Markovian predictors is well understood in the case of quadratic transaction costs, but remains intractable when these costs are $L_1$. We present a mean-field approach that reduces the multi-asset problem to a single-asset problem, with an effective predictor that includes a risk averse component. We obtain a simple approximate solution in the case of Ornstein-Uhlenbeck predictors and maximum position constraints. The optimal strategy is of the "bang-bang" type… 
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