Optimal placement of a small order in a diffusive limit order book

@article{FigueroaLopez2017OptimalPO,
  title={Optimal placement of a small order in a diffusive limit order book},
  author={Jos'e E. Figueroa-L'opez and Hyoeun Lee and Raghu Pasupathy},
  journal={arXiv: Trading and Market Microstructure},
  year={2017}
}
We study the optimal placement problem of a stock trader who wishes to clear his/her inventory by a predetermined time horizon t, by using a limit order or a market order. For a diffusive market, we characterize the optimal limit order placement policy and analyze its behavior under different market conditions. In particular, we show that, in the presence of a negative drift, there exists a critical time t0>0 such that, for any time horizon t>t0, there exists an optimal placement, which… 

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