Optimal Execution Strategy: An Agent-based Approach

Optimal Execution Strategy: An Agent-based Approach

Investors who want to execute large orders always have to trade-off between price effect and opportunity cost. The purpose of this research is to investigate an optimal way to execute such orders. In this research we consider the possibility of order types and the optimal trading strategy based on t...

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Bibliographic Details
Main Authors: Mohammad Ali Rastegar, Khatereh Saedi Far
Format: Article
Language:fas
Published: University of Tehran 2017-07-01
Series:تحقیقات مالی
Subjects:
agent-based simulation
algorithmic trading
execution cost
price impact
trade execution strategy
Online Access:https://jfr.ut.ac.ir/article_64808_dcd363aef4e39af6195e8f0782c7b884.pdf
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spelling doaj-b2d9be8549fc4f108138b2299f3918b52020-11-25T02:27:39ZfasUniversity of Tehranتحقیقات مالی1024-81532423-53772017-07-0119226223910.22059/jfr.2017.240979.100651064808Optimal Execution Strategy: An Agent-based ApproachMohammad Ali Rastegar0Khatereh Saedi Far1Assistant Prof. in Financial Engineering, Faculty of Industrial Engineering, Tarbiat Modares University, Tehran, IranM.Sc. in Financial Engineering, Faculty of Financial Science, Kharazmi University, Tehran, IranInvestors who want to execute large orders always have to trade-off between price effect and opportunity cost. The purpose of this research is to investigate an optimal way to execute such orders. In this research we consider the possibility of order types and the optimal trading strategy based on the volume weighted average price (VWAP), using historical data of a share in Tehran Stock Exchange. In the simulated trading market, we also consider the price effect for large orders. The results show that for a large order on buy-side, execution strategy adopting multiple order types can perform better than those using single order type. The optimal strategy has managed to reduce the volume weighted average price (transaction costs) by 0.137 percent compared to the market.https://jfr.ut.ac.ir/article_64808_dcd363aef4e39af6195e8f0782c7b884.pdfagent-based simulationalgorithmic tradingexecution costprice impacttrade execution strategy
collection DOAJ
language fas
format Article
sources DOAJ
author Mohammad Ali Rastegar
Khatereh Saedi Far
spellingShingle Mohammad Ali Rastegar
Khatereh Saedi Far
Optimal Execution Strategy: An Agent-based Approach
تحقیقات مالی
agent-based simulation
algorithmic trading
execution cost
price impact
trade execution strategy
author_facet Mohammad Ali Rastegar
Khatereh Saedi Far
author_sort Mohammad Ali Rastegar
title Optimal Execution Strategy: An Agent-based Approach
title_short Optimal Execution Strategy: An Agent-based Approach
title_full Optimal Execution Strategy: An Agent-based Approach
title_fullStr Optimal Execution Strategy: An Agent-based Approach
title_full_unstemmed Optimal Execution Strategy: An Agent-based Approach
title_sort optimal execution strategy: an agent-based approach
publisher University of Tehran
series تحقیقات مالی
issn 1024-8153
2423-5377
publishDate 2017-07-01
description Investors who want to execute large orders always have to trade-off between price effect and opportunity cost. The purpose of this research is to investigate an optimal way to execute such orders. In this research we consider the possibility of order types and the optimal trading strategy based on the volume weighted average price (VWAP), using historical data of a share in Tehran Stock Exchange. In the simulated trading market, we also consider the price effect for large orders. The results show that for a large order on buy-side, execution strategy adopting multiple order types can perform better than those using single order type. The optimal strategy has managed to reduce the volume weighted average price (transaction costs) by 0.137 percent compared to the market.
topic agent-based simulation
algorithmic trading
execution cost
price impact
trade execution strategy
url https://jfr.ut.ac.ir/article_64808_dcd363aef4e39af6195e8f0782c7b884.pdf
work_keys_str_mv AT mohammadalirastegar optimalexecutionstrategyanagentbasedapproach
AT khaterehsaedifar optimalexecutionstrategyanagentbasedapproach
_version_ 1724841750265069568

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