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2018 | 19 | 4 | 388-397
Article title

ON STOCK TRADING WITH STOCK PRICE DRIFT AND MARKET IMPACT

Content
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Languages of publication
EN
Abstracts
EN
The drift in the stock price and the occurring of the transaction costs in the stock market can significantly affect the profitability of the investment in the stock. In the article the model of the market is described with the stock price drift and two sources of the transaction costs: bid-ask spread and market impact. In the considered model, the trading strategy which maximizes the expected amount of money received from selling the shares of the stock of the market participant subject to the constraint of the constant trading velocity is explicitly determined. The numerical example is also included.
Contributors
  • Faculty of Applied Informatics and Mathematics, Warsaw University of Life Sciences – SGGW, Poland
References
  • Almgren R., Chriss N. (2000) Optimal Execution of Portfolio Transactions. Journal of Risk, 3, 5-39.
  • Almgren R., Thum C., Hauptmann E., Li H. (2005) Direct Estimation of Equity Market Impact. Risk, 18, 58-62.
  • Barucci E. (2003) Financial Markets Theory – Equilibrium, Efficiency and Information. Springer-Verlag, London.
  • Czekaj J., Woś M., Żarnowski J. (2001) Efektywność giełdowego rynku akcji w Polsce. Z perspektywy dziesięciolecia, Warszawa, Wydawnictwo Naukowe PWN (in Polish).
  • Elton R. J., Gruber M. J., Brown S. J., Goetzmann W. N. (2010) Modern Portfolio Theory and Investment Analysis. John Wiley & Sons, Hoboken.
  • Kociński M. (2014) Transaction Costs and Market Impact in Investment Management. e-Finanse, 10, 28-35.
  • Zarinelli W., Treccani M., Doyne Farmer J., Lilo F. (2014) Beyond the Square Root: Evidence for Logarithmic Dependence of Market Impact on Size and Participation Rate. http://arxiv.org/pdf/1412.2152v1.pdf.
Notes
EN
Document Type
Publication order reference
Identifiers
YADDA identifier
bwmeta1.element.desklight-c826185b-0def-454d-a2d2-ef461412fd32
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