| Περίληψη: | In the seminal paper on optimal execution of portfolio transactions, Almgren and Chriss (2001) define the
optimal trading strategy to liquidate a fixed volume of a single security under price uncertainty. Yet there
exist situations, such as in the power market, in which the volume to be traded can only be estimated
and becomes more accurate when approaching a specified delivery time. During the course of execution, a
trader should then constantly adapt their trading strategy to meet their fluctuating volume target. In this
paper, we develop a model that accounts for volume uncertainty and we show that a risk-averse trader has
benefit in delaying their trades. More precisely, we argue that the optimal strategy is a trade-off between
early and late trades in order to balance risk associated with both price and volume. By incorporating a
risk term related to the volume to trade, the static optimal strategies suggested by our model avoid the
explosion in the algorithmic complexity usually associated with dynamic programming solutions, all the
while yielding competitive performance.
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