Order Placement Strategy: Trade-off between Market Impact and Non-Execution Risk
<strong>Objective: </strong>This contribution proposes an order placement strategy which can be run on simulating continuous financial markets, within an agent-based model framework. <br /><strong>Methods: </strong>In order to improve the efficiency of price discovery,...
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| Format: | Article |
| Language: | fas |
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University of Tehran
2018-06-01
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| Series: | تحقیقات مالی |
| Subjects: | |
| Online Access: | https://jfr.ut.ac.ir/article_67696_276a706243a94ba5c0a01055b79f4082.pdf |
| _version_ | 1818971461849710592 |
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| author | Mohammad Ali Rastegar Farideh Teimoory Behnam Bagherian |
| author_facet | Mohammad Ali Rastegar Farideh Teimoory Behnam Bagherian |
| author_sort | Mohammad Ali Rastegar |
| collection | DOAJ |
| description | <strong>Objective: </strong>This contribution proposes an order placement strategy which can be run on simulating continuous financial markets, within an agent-based model framework. <br /><strong>Methods: </strong>In order to improve the efficiency of price discovery, the order placement decision is given by an optimization model which minimizes the risk adjusted execution cost, taking into consideration relevant market microstructure factors such as market impact. The trading behavior of the agents has been extracted from intraday LOB data of Foulad Stock in Tehran Stock Exchange. <br /><strong>Results: </strong>The market has been simulated for 30 days and the results indicated that the optimized ordering strategy, in terms of the average purchase price of the share, the average waiting time for the transaction of each share and the average volume of the order traded, had better performance in comparison to other strategies examined. <br /><strong>Conclusion: </strong>We can claim that taking into consideration both non-execution risk and execution cost could raise the performance in comparison to other strategies based on the aggressive level of the traders. |
| first_indexed | 2024-12-20T14:52:45Z |
| format | Article |
| id | doaj.art-b187f9498a0c42a3b15484c1a3c42b53 |
| institution | Directory Open Access Journal |
| issn | 1024-8153 2423-5377 |
| language | fas |
| last_indexed | 2024-12-20T14:52:45Z |
| publishDate | 2018-06-01 |
| publisher | University of Tehran |
| record_format | Article |
| series | تحقیقات مالی |
| spelling | doaj.art-b187f9498a0c42a3b15484c1a3c42b532022-12-21T19:36:57ZfasUniversity of Tehranتحقیقات مالی1024-81532423-53772018-06-0120215117210.22059/frj.2018.253673.100662567696Order Placement Strategy: Trade-off between Market Impact and Non-Execution RiskMohammad Ali Rastegar0Farideh Teimoory1Behnam Bagherian2Assistant Prof., Faculty of Industrial Engineering, Tarbiat Modares University, Tehran, IranM.Sc. student of Finance, Faculty of Financial Sciences, Kharazmi University, Tehran, IranM.Sc. of Finance, Faculty of Industrial Engineering, Tarbiat Modares University, Tehran, Iran<strong>Objective: </strong>This contribution proposes an order placement strategy which can be run on simulating continuous financial markets, within an agent-based model framework. <br /><strong>Methods: </strong>In order to improve the efficiency of price discovery, the order placement decision is given by an optimization model which minimizes the risk adjusted execution cost, taking into consideration relevant market microstructure factors such as market impact. The trading behavior of the agents has been extracted from intraday LOB data of Foulad Stock in Tehran Stock Exchange. <br /><strong>Results: </strong>The market has been simulated for 30 days and the results indicated that the optimized ordering strategy, in terms of the average purchase price of the share, the average waiting time for the transaction of each share and the average volume of the order traded, had better performance in comparison to other strategies examined. <br /><strong>Conclusion: </strong>We can claim that taking into consideration both non-execution risk and execution cost could raise the performance in comparison to other strategies based on the aggressive level of the traders.https://jfr.ut.ac.ir/article_67696_276a706243a94ba5c0a01055b79f4082.pdforder placement strategymarket microstructureagent-based simulationalgorithmic trading |
| spellingShingle | Mohammad Ali Rastegar Farideh Teimoory Behnam Bagherian Order Placement Strategy: Trade-off between Market Impact and Non-Execution Risk تحقیقات مالی order placement strategy market microstructure agent-based simulation algorithmic trading |
| title | Order Placement Strategy: Trade-off between Market Impact and Non-Execution Risk |
| title_full | Order Placement Strategy: Trade-off between Market Impact and Non-Execution Risk |
| title_fullStr | Order Placement Strategy: Trade-off between Market Impact and Non-Execution Risk |
| title_full_unstemmed | Order Placement Strategy: Trade-off between Market Impact and Non-Execution Risk |
| title_short | Order Placement Strategy: Trade-off between Market Impact and Non-Execution Risk |
| title_sort | order placement strategy trade off between market impact and non execution risk |
| topic | order placement strategy market microstructure agent-based simulation algorithmic trading |
| url | https://jfr.ut.ac.ir/article_67696_276a706243a94ba5c0a01055b79f4082.pdf |
| work_keys_str_mv | AT mohammadalirastegar orderplacementstrategytradeoffbetweenmarketimpactandnonexecutionrisk AT faridehteimoory orderplacementstrategytradeoffbetweenmarketimpactandnonexecutionrisk AT behnambagherian orderplacementstrategytradeoffbetweenmarketimpactandnonexecutionrisk |