Optimal control of execution costs

@article{Bertsimas1998OptimalCO,
  title={Optimal control of execution costs},
  author={D. Bertsimas and A. Lo},
  journal={Journal of Financial Markets},
  year={1998},
  volume={1},
  pages={1-50}
}
We derive dynamic optimal trading strategies that minimize the expected cost of trading a large block of equity over a fixed time horizon. Specifically, given a fixed block SM of shares to be executed within a fixed finite number of periods „, and given a price-impact function that yields the execution price of an individual trade as a function of the shares traded and market conditions, we obtain the optimal sequence of trades as a function of market conditions — closed-form expressions in… Expand

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