Optimal execution of a trading order
The competition and voting have completed. Winners were determined by the citizens of Lykke City.
Days of the project
Nov 27 - Jan 16 (49 days)
Nov 27 - Jan 7
Nov 28 - Jan 7
Jan 7 - Jan 16
How to optimally execute a large order is a very interesting and active field of research. With the rise of computerized trading, algorithmic trading has become an industry where brokerage firms compete to offer the best execution strategies. Typically, algorithms break large orders into smaller orders, which are sequentially executed over a trading window.
Different strategies to slice big orders into smaller orders:
- Time Weighted Average Price (TWAP): An algorithm that executes the trade over a timeframe determined by the user.
- Value Weighted Average Price (VWAP): Uses the historical volume pattern of a stock to determine a trading trajectory intended to track the volume weighted average price.
- Participate Of Volume (PVOL): The PVOL algorithm attempts to minimize the market impact by participating in a constant, user-decided percentage of trading volume over a time interval.
Please research the above-mentioned strategies using theoretical or empirical approach depending on your preferences and also elaborate on the advantages and disadvantages of them. A set of experiments with real data or theoretical models programmed in any language should also be included in your results.
Requirements for the work
- The submission should include an analysis elaborating on the advantages and disadvantages of the different execution strategies as well as the programming code used for your research work.
- Any formulas or plots should be also included in the document.
A few disclaimers
There is no guarantee of winning a prize. The prizes are only awarded to entries that the Lykke judges find worthwhile. Prizes are awarded in Lykke coins, which may be redeemed for currency and sent to your bank. You must be at least 18 years of age. You must not submit twice — your first submission is the one that counts. You will be responsible for declaring your own income to your local tax authorities. All submissions will be disclosed to the public. The prizes are given at Lykke’s sole discretion. The decisions of the judges will be final — there is no appeals process if your project does not win a prize. No other compensation will be given at this stage.