Alexander Schied (Mannheim)
Mathematical aspects of market impact modeling
Abstract: In this talk, we discuss the problem of executing large orders in illiquid markets so as to optimize the resulting liquidity costs. There are several reasons why this problem is relevant. On the mathematical side, it leads to interesting  nonlinearity effects that arise from the price feedback of  strategies. On the economical side, it helps  understanding which market impact models are viable, because the analysis of order execution provides a test for the existence of undesirable properties of a model. In the first part of the talk, we present market impact models with transient price impact, modeling the resilience of electronic limit order books. In the second part of the talk, we consider the Almgren-Chriss market impact model and analyze the effects of risk aversion on optimal strategies by using stochastic control methods. In the final part, we discuss effects that occur in a multi-player equilibrium.