The Optimal Order Execution Problem within the Framework of a High-Frequency Trading - Sample Model

Bławat, Bogusław (2012): The Optimal Order Execution Problem within the Framework of a High-Frequency Trading - Sample Model. Published in: Zeszyty Naukowe Uniwersytetu Szczecińskiego , Vol. 689, No. 50 (2012): pp. 385-390.

Abstract

Optimal execution of large orders is examined within the technical framework of High-Frequency Trading (HFT). A sample model is proposed, which extends an existing strategy through HFT means like time slicing with random splitting of the order volume and time shifting. As this strategy brings some information asymmetry to the trading parties, a general question about its impact on market benefit is raised and proposed for further academic research.

• Item Type: MPRA Paper
• Language: English
• Keywords: Optimal order execution, HFT, liquidity
• Subjects: C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C58 - Financial Econometrics; G - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency ; Event Studies ; Insider Trading

References

Bertsimas D., Lo A.: Optimal control of execution costs, „Journal of Financial Markets” 1998, 1.

Durbin M.: All About High-Frequency Trading, McGraw-Hill, 2010.

Gomber P., Arndt B., Lutat M., Uhle T.: High-Frequency Trading, Deutsche Börse AG, Frankfurt 2011.

Kay R.: Pragmatic Network Latency Engineering: Fundamental Facts and Analysis, cPacket Networks 2009. Working Paper.

Menkveld A.: Foresight Driver Review: Electronic Trading and Market Structure, UK Goverment’s Foresight Project, DR16, 2011.