hard · Market Microstructure

In the Almgren-Chriss optimal execution model, what is the primary consequence of a trader having very high risk aversion (λ_risk rightarrow ∞)?

1. The trajectory will be back-loaded to capture late-day liquidity.
2. The optimal trajectory becomes a perfectly linear TWAP schedule.
3. The optimal trajectory shifts toward immediate execution to eliminate timing risk.
4. The trader will wait until the end of the day to execute to minimize impact.

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