Optimal trade execution in a stochastic limit order book model

This talk is given by Prof. Mikhail URUSOV (University Duisburg-Essen)

We analyze an optimal trade execution problem in a financial market with stochastic liquidity. To this end we set up a limit order book model in which both order book depth and resilience evolve randomly in time. Trading is allowed in both directions. Due to the stochastic dynamics of the order book depth and resilience, optimal execution strategies are typically of infinite variation, and the first thing to be discussed is how to extend the state dynamics and the cost functional to allow for general semimartingale strategies. We then derive a quadratic BSDE that under appropriate assumptions characterizes minimal execution costs, identify conditions under which an optimal execution strategy exists and, finally, illustrate our findings in several examples. 

This is a joint work with Julia Ackermann and Thomas Kruse.

If you are interested to join this talk, please contact Dr Miryana Grigorova at m.r.grigorova@leeds.ac.uk for the Zoom details.