Optimal Portfolio Liquidation with Limit Orders, by Olivier Guéant, Charles-Albert Lehalle, Joaquin Fernandez Tapia is a new paper on how to optimally compute one sided quotes of a trading algorithm.
Optimal portfolio liquidation with limit orders arxiv.org
This paper addresses the optimal scheduling of the liquidation of a portfolio using a new angle. Instead of focusing only on the scheduling aspect like Almgren and Chriss, or only on the liquidity-consuming orders like Obizhaeva and
I like the reasoning underlying this paper
One query: On page 13 the authors state:
Since we do not explicitly take into account the underlying market, there is no market bid-ask spread in the model. Thus, we simply chose to calibrate 15 A and k as functions of the market bid-ask spread, making then an off-model hypothesis.
Is this a contradiction?, please expand …