medium · Market Microstructure market-impact
A risk-averse trader (λ_risk > 0) needs to execute a large sell order using the Almgren-Chriss framework.
How will their optimal trajectory differ from a risk-neutral trader?
- They will trade only in dark pools, avoiding visible market impact.
- They will front-load the execution, trading more aggressively at the start.
- They will execute at a constant, steady rate across the entire time horizon.
- They will back-load the execution to occur later, once trading volume is at its highest.
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