Year: 2015
Type: article
Abstract: The volume weighted average price (VWAP) execution strategy is well known and widely used in practice. In this study, we explicitly introduce a trading volume process into the Almgren-Chriss model, which is a standard model for optimal execution. We then show that the VWAP strategy is the optimal execution strategy for a risk-neutral trader. Moreover, we examine the case of a risk-averse trader and derive the first-order asymptotic expansion of the optimal strategy for a mean-variance optimization problem.
Source: JSIAM Letters
DOI: 10.14495/jsiaml.7.33
Author: Takashi Kato
Institution: The University of Osaka
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: diamond
OpenAlex ID: W2951297535