search query: @indexterm Optimal control theory / total: 44
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| Author: | Bertsimas, D. Lo, A. |
| Title: | Optimal control of execution costs |
| Journal: | Journal of Financial Markets
1998 : APR, VOL. 1:1, p. 1-50 |
| Index terms: | COSTS CONTROL OPTIMAL CONTROL THEORY |
| Language: | eng |
| Abstract: | The authors 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 S of shares to be executed within a fixed finite number of periods T, 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, the authors obtain the optimal sequence of trades as a function of market conditions - closed-form expressions in some cases - that minimizes the expected cost of executing S within T periods. |
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