Chapter 14: Portfolio Algorithms and Trade Schedule Optimization
Introduction
Portfolio algorithms and multiperiod trade schedule optimization have gained momentum in the financial community due to the increase in program and algorithmic trading. By understanding how portfolio trading decisions influence returns, traders will be better prepared to make decisions consistent with the overall investment objectives of the fund. Unfortunately, traditional optimization techniques are not adequate for portfolio needs due to the nonlinearity of the price impact function, the large number of decision variables, and the time it takes to calculate the answer.
Each time a trader is given a trade list to execute (e.g., basket, program, or portfolio) ...
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