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DROP Execution

DROP Execution contains the Functionality that implements Optimal Impact/Capture Based Trading Trajectories - Deterministic, Stochastic, Static, and Dynamic.

Component Packages

  • Adaptive DROP Execution Adaptive Package implements the Coordinate Variation Based Adaptive Execution.

  • ATHL DROP Execution ATHL Package implements the Almgren, Thum, Hauptmann, and Li (2005) Calibration.

  • Bayesian DROP Execution Bayesian Package implements the Bayesian Price Based Optimal Execution.

  • Capture DROP Execution Capture Package contains the Execution Trajectory Transaction Cost Capture.

  • Cost DROP Execution Cost Package contains the Linear Temporary Market Impact Cost.

  • Discrete DROP Execution Discrete Package implements the Trajectory Slice Execution Cost Distribution.

  • Dynamics DROP Execution Dynamics Package contains the Arithmetic Price Evolution Execution Parameters.

  • Evolution DROP Execution Evolution Package holds the Execution Cost Market Impact Decomposition.

  • HJB DROP Execution HJB Package implements the Optimal Hamilton-Jacobi-Bellman Execution Functionality.

  • Impact DROP Execution Impact Package contains the Market Impact Transaction Function Implementation.

  • Latent DROP Execution Latent Package generates the Correlated Latent Market State Sequence.

  • Non-Adaptive DROP Execution Non-Adaptive Package generates the Almgren-Chriss Static Optimal Trajectory.

  • Optimum DROP Execution Optimum Package generates the Almgren-Chriss Efficient Trading Trajectories.

  • Parameters DROP Execution Parameters Package contains the Empirical Market Impact Coefficients Calibration.

  • Principal DROP Execution Principal Package implements Information Ratio Based Principal Trading.

  • Profile Time DROP Execution Profile Time Package implements the Participation Rate Profile Time Models.

  • Risk DROP Execution Risk Package contains the Optimal Execution MVO Efficient Frontier.

  • Sensitivity DROP Execution Sensitivity Package implements the Trajectory Control Nodes Sensitivity Greeks.

  • Strategy DROP Execution Strategy Package implements the Discrete/Continuous Trading Trajectory Schedule.

  • Trading Time DROP Execution Trading Time Package implements the Coordinated Variation Trading Time Models.

References

  • Almgren, R., and N. Chriss (1999): Value under Liquidation Risk 12 (12)

  • Almgren, R. F., and N. Chriss (2000): Optimal Execution of Portfolio Transactions Journal of Risk 3 (2) 5-39

  • Almgren, R., and N. Chriss (2003): Optimal Execution with Nonlinear Impact Functions and Trading- Enhanced Risk Applied Mathematical Finance 10 (1) 1-18

  • Almgren, R., and N. Chriss (2003): Bidding Principles Risk 97-102

  • Almgren, R., C. Thum, E. Hauptmann, and H. Li (2005): Equity Market Impact Risk 18 (7) 57-62

  • Almgren, R. F. (2009): Optimal Trading in a Dynamic Market https://www.math.nyu.edu/financial_mathematics/content/02_financial/2009-2.pdf

  • Almgren, R. F. (2012): Optimal Trading with Stochastic Liquidity and Volatility SIAM Journal of Financial Mathematics 3 (1) 163-181

  • Artzner, P., F. Delbaen, J. M. Eber, and D. Heath (1999): Coherent Measures of Risk Mathematical Finance 9 203-228

  • Basak, S., and A. Shapiro (2001): Value-at-Risk Based Risk Management: Optimal Policies and Asset Prices Review of Financial Studies 14 371-405

  • Bertsimas, D., and A. W. Lo (1998): Optimal Control of Execution Costs Journal of Financial Markets 1 1-50

  • Brunnermeier, L. K., and L. H. Pedersen (2005): Predatory Trading Journal of Finance 60 (4) 1825-1863

  • Chan, L. K. C., and J. Lakonishak (1995): The Behavior of Stock Prices around Institutional Trades Journal of Finance 50 1147-1174

  • Geman, H., D. B. Madan, and M. Yor (2001): Time Changes for Levy Processes Mathematical Finance 11 (1) 79-96

  • Huberman, G., and W. Stanzl (2004): Price Manipulation and Quasi-arbitrage Econometrics 72 (4) 1247-1275

  • Jones, C. M., G. Kaul, and M. L. Lipson (1994): Transactions, Volume, and Volatility Review of Financial Studies 7 (4) 631-651

  • Keim, D. B., and A. Madhavan (1997): Transaction Costs and Investment Style: An Inter-exchange Analysis of Institutional Equity Trades Journal of Financial Economics 46 265-292

  • Kissell, R., and R. Malamut (2007): Algorithmic Decision Making Framework Journal of Trading 1 (1) 12-21

  • Walia, N. (2006): Optimal Trading: Dynamic Stock Liquidation Strategies Princeton University

DROP Specifications