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Optimal liquidation with temporary and permanent price impact, an application to cryptocurrencies

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dc.contributor.gruplacGrupo de investigaciones. Facultad de Economía. Universidad del Rosario
dc.creatorHugo E. Ramírez
dc.creatorSánchez López, Julián Fernando
dc.date.accessioned2023-03-17T19:41:01Z
dc.date.available2023-03-17T19:41:01Z
dc.date.created2023-03-17
dc.date.issued2023-02-17
dc.descriptionEste artículo estudia la liquidación óptima de activos financieros en la presencia de impactos de precio temporales y permanentes. Empezamos presentando soluciones analíticas al problema con impacto temporal lineal, y impacto permantente lineal y cuadrático. Luego, usando información del libro de ordenes para la criptomoneda BNB, estimamos la forma funcional del los impactos permanente y temporal bajo tres escenarios diferentes: subestimado, sobrestimado y estimado promedio, encontrando diferentes formas funcionales para cada escenario. Usando diferencias finitas e iteración de política óptima resolvemos el problema de forma numerica y observamos cambios interesantes en la política óptima cuando aplicamos las formas funcionales calibradas lineal y potencia para los impactos temporal y permanente. Luego con estas políticas óptimas, identificamos la trayectoria de liquidación óptima y con objeto de comparar, simulamos liquidaciones entre las diferentes estrategias óptimas bajo las diferentes parametrizaciones y contra una estrategia ingenua. finalmente, caracterizanos las políticas óptimas basados en la forma funcional del inventario y encontramos que las políticas que generan mayor ganacia son aquellas que empiezan con baja taza de liquidación que aumenta con el tiempo.
dc.description.abstractThis paper studies the optimal liquidation of stocks in the presence of temporary and permanent price impacts, and we focus in the case of cryptocurrencies. We start by presenting analytical solutions to the problem with linear temporary impact, and linear and quadratic permanent impact. Then, using data from the order book of the BNB cryptocurrency, we estimate the functional form of the temporary and permanent price impact in three different scenarios: underestimation, overestimation and average estimation, finding different functional forms for each scenario. Using finite differences and optimal policy iteration, we solve the problem numerically and observe interesting changes in the optimal liquidation policy when applying calibrated linear and power forms for the temporary and permanent price impacts. Then, with these optimal policies, we identify optimal liquidation trajectories and simulate the liquidation of initial inventories to compare the performance among the optimal strategies under different parametrizations and against a naive strategy. Finally, we characterize the optimal policies based on the functional form of the inventory and find that policies generating the highest revenue are those starting with a low trading rate and increasing it as time passes.
dc.format.extent20 pp
dc.format.mimetypeapplication/pdf
dc.identifier.urihttps://repository.urosario.edu.co/handle/10336/38259
dc.language.isospa
dc.publisherUniversidad del Rosario
dc.publisher.departmentFacultad de Economía
dc.relation.urihttps://ideas.repec.org/p/col/000092/020669.html
dc.rightsAttribution-NonCommercial-ShareAlike 4.0 International*
dc.rights.accesRightsinfo:eu-repo/semantics/openAccess
dc.rights.accesoAbierto (Texto Completo)
dc.rights.urihttp://creativecommons.org/licenses/by-nc-sa/4.0/*
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dc.source.instnameinstname:Universidad del Rosario
dc.source.reponamereponame:Repositorio Institucional EdocUR
dc.subject.keywordOptimal liquidation, price impact, finite differences, Stochastic Control, cryptocurrencies
dc.subject.keywordPrice impact
dc.subject.keywordFinite differences
dc.subject.keywordStochastic control
dc.subject.keywordCryptocurrencies
dc.titleOptimal liquidation with temporary and permanent price impact, an application to cryptocurrencies
dc.typeworkingPaper
dc.type.hasVersioninfo:eu-repo/semantics/draft
dc.type.spaDocumento de Trabajo
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