Optimal Execution with Stochastic Delay

We show how traders use marketable limit orders (MLOs) to liquidate a position over trading window when there is latency in the marketplace. MLOs are liquidity taking that specify price and for immediate execution only; however, if of MLO precludes it from being filled, exchange rejects trade. frame our model as an impulse control problem with stochastic where trader controls times limits sent exchange. impatient takers submit may walk book (capped by price) increase probability filling trades. On other hand, patient speculative only filled has been advantageous move prices period. Patient who fast do not their speed hit quotes they observe, nor finish programme early; complete many possible. foreign data implement random-latency-optimal strategy compare four benchmarks: deterministic latency, zero time-weighted average price, entire order at best quote LOB beginning window. find performances random-latency deterministic-latency strategies similar. For traders, these two outperform three benchmarks amount greater than transaction costs paid markets. Around news announcements, value outperformance between ten costs. The superiority latency-optimal due both protection MLOs.