Optimal Trading with Speed-Dependent Transaction Cost Rates: A Flexible Framework

• 成果类型: Article; Early Access
• 署名作者: Liu, Hong; Qian, Shuaijie; Xu, Jing
• 署名单位: Washington University (WUSTL); Hong Kong University of Science & Technology; Renmin University of China
• 刊物名称: OPERATIONS RESEARCH
• ISSN/ISSBN: 0030-364X
• DOI: 10.1287/opre.2022.0160
• 发表日期: 2025
• 关键词: limit order book; Return predictability; PORTFOLIO SELECTION; optimal consumption; optimal liquidation; optimal execution; asset prices; MARKET; equilibrium; INVESTMENT

摘要

The effective transaction cost rate (TCR) incurred by a large trade often depends on the execution speed. We propose a continuous-time workhorse model to study optimal trading strategies with speed-dependent TCRs. The TCR function is flexible enough for approximating general TCR functions of trading speeds. Applying our framework to order execution problems, we theoretically characterize the structure of the optimal trading strategy and numerically analyze it extensively after calibration. When the order to be executed is large, our model implies simultaneously order-shredding strategy and U-shape trading speeds over time, both of which are commonly observed in practice. Moreover, we show that adopting some intuitive but suboptimal trading strategies can be costly.