Dynamic Portfolio Execution

• 成果类型: Article
• 署名作者: Tsoukalas, Gerry; Wang, Jiang; Giesecke, Kay
• 署名单位: University of Pennsylvania; Massachusetts Institute of Technology (MIT); National Bureau of Economic Research; Stanford University
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2017.2865
• 发表日期: 2019
• 页码: 2015-2040
• 关键词: portfolio management; Market microstructure; Limit order book; liquidity risk; market impact; programming; dynamic; QUADRATIC

摘要

We analyze the optimal execution problem of a portfolio manager trading multiple assets. In addition to the liquidity and risk of each individual asset, we consider cross asset interactions in these two dimensions, which substantially enriches the nature of the problem. Focusing on the market microstructure, we develop a tractable order book model to capture liquidity supply/demand dynamics in a multiasset setting, which allows us to formulate and solve the optimal portfolio execution problem. We find that cross asset risk and liquidity considerations are of critical importance in constructing the optimal execution policy. We show that even when the goal is to trade a single asset, its optimal execution may involve transitory trades in other assets. In general, optimally managing the risk of the portfolio during the execution process affects the time synchronization of trading in different assets. Moreover, links in the liquidity across assets lead to complex patterns in the optimal execution policy. In particular, we highlight cases where aggregate costs can be reduced by temporarily overshooting one's target portfolio.