Optimal Execution of Derivatives: A Taylor Expansion Approach

  • Gerardo Hernandez-del-ValleEmail author
  • Yuemeng Sun
Part of the Systems & Control: Foundations & Applications book series (SCFA)


In this chapter, we derive the Markowitz-optimal trading trajectory for a trader who wishes to sell a large position of Kunits on some contingent claim. To do so, we first use a Taylor expansion of the derivative with respect to the price of the underlying asset at time zero. We then use up to the second-order approximation to solve the mean-variance optimization problem.


Contingent Claim Market Impact Optimal Trading Large Position Claim Problem 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.



The authors were partially supported by Algorithmic Trading Management LLC.


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Copyright information

© Springer Science+Business Media, LLC 2012

Authors and Affiliations

  1. 1.Statistics DepartmentColumbia UniversityNew YorkUSA
  2. 2.Cornell UniversityThecaUSA

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