Dynamic trade execution : a grammatical evolution approach

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Title: Dynamic trade execution : a grammatical evolution approach
Authors: Cui, Wei
Brabazon, Anthony
O'Neill, Michael
Permanent link: http://hdl.handle.net/10197/3530
Date: Feb-2011
Abstract: Trade execution is concerned with the actual mechanics of buying or selling the desired amount of a financial instrument. Investors wishing to execute large orders face a tradeoff between market impact and opportunity cost. Trade execution strategies are designed to balance out these costs, thereby minimising total trading cost. Despite the importance of optimising the trade execution process, this is difficult to do in practice due to the dynamic nature of markets and due to our imperfect understanding of them. In this paper, we adopt a novel approach, combining an evolutionary methodology whereby we evolve high-quality trade execution strategies, with an agent-based artificial stock market, wherein the evolved strategies are tested. The evolved strategies are found to outperform a series of benchmark strategies and several avenues are suggested for future work.
Funding Details: Science Foundation Ireland
Type of material: Journal Article
Publisher: Inderscience Enterprises
Journal: International Journal of Financial Markets and Derivatives
Volume: 2
Issue: 1/2
Start page: 4
End page: 31
Copyright (published version): 2011 Inderscience Enterprises Ltd.
Keywords: Algorithmic tradingATTrade executionArtificial stock marketEvolutionary computationECGrammatical evolutionGEFinancial markets
Subject LCSH: Financial instruments
Evolutionary computation
International finance
Stock exchanges--Computer simulation
Multiagent systems
DOI: 10.1504/IJFMD.2011.038526
Other versions: http://dx.doi.org/10.1504/IJFMD.2011.038526
Language: en
Status of Item: Peer reviewed
Appears in Collections:FMC² Research Collection
Business Research Collection

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