hard · Quantitative Finance microstructure-arb
The Almgren-Chriss framework is used to solve the optimal execution problem.
For a risk-averse trader who must liquidate a large block of shares, what is the characteristic shape of the optimal trading trajectory?
- A schedule that front-loads the execution to reduce timing risk.
- A back-loaded schedule to take advantage of late-day liquidity.
- A schedule that only executes during periods of high market volatility.
- A perfectly linear schedule (VWAP) to minimize price impact.
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