Background
The problem of optimal execution of large orders over a finite interval of time is not new. Interested readers may review the risk-adjusted cost minimization approach introduced by Almgren and Chriss (2001).
Generally speaking, the trader faces the problem of optimal execution of large orders because of limited supply-demand liquidity in the market(s). If the order size is small enough there is no such a problem and the whole volume could be executed immediately.
One of the approaches used by traders is to split the original order into a sequence of orders of smaller sizes and execute them within a required time interval.
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The Deltix Quantitative Research Team
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