Receding Horizon Optimization of Large Trade Orders

The optimal execution of stock trades is a relevant and interesting problem as it key in maximizing profits reducing risks when investing the market. In case large orders, becomes even more complex impact order market has to be taken into account. usual solution split orders set smaller suborders that must executed within prescribed time window. This leads deciding window execute each suborder. There are popular ways executing trading these like those which try track “Time Weighted Average Price” “Volume Price”, usually called TWAP VWAP orders. paper presents strategy optimize splitting trade over given based on an optimization applied following receding horizon approach. approach reduces prediction errors due uncertain dynamics, by using new values price series they available goes on. Suborder size constraints account both limit relies traded volume forecast but independent technique used. performance index weighs not only financial cost suborders, also forecasting accuracy. A tailored algorithm proposed for efficiently solving corresponding problem. Most computations can parallelized. Finally, been tested through study composed stocks Chinese A-share