Optimal posting price of limit orders: learning by trading

11 Dec 2011Sophie LaruelleCharles-Albert LehalleGilles Pagès

Considering that a trader or a trading algorithm interacting with markets during continuous auctions can be modeled by an iterating procedure adjusting the price at which he posts orders at a given rhythm, this paper proposes a procedure minimizing his costs. We prove the a.s. convergence of the algorithm under assumptions on the cost function and give some practical criteria on model parameters to ensure that the conditions to use the algorithm are fulfilled (using notably the co-monotony principle)... (read more)

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