medium · Market Microstructure market-impact
A trader is risk-averse and uses an Almgren-Chriss optimal execution strategy.
Compared to a risk-neutral TWAP strategy, how will the trader's execution trajectory appear?
- The trajectory will be back-loaded, trading more aggressively near the end.
- The trajectory will follow a U-shape, matching the market's historical volume profile.
- The trajectory will be identical to TWAP, trading at a constant rate.
- The trajectory will be front-loaded, trading more aggressively at the start.
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