medium · Market Microstructure market-impact
If a trader is risk-neutral (λ_risk = 0) in the Almgren-Chriss framework, what is the optimal execution trajectory for selling a large block of shares?
- A U-shaped trajectory following the market's historical volume profile.
- Selling 90% of the shares in the final period of the horizon.
- Immediate execution in the first period to minimize timing risk.
- A constant rate of selling over the entire time horizon (TWAP).
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