arXiv q-fin· Matteo Smerlak·· 13 hr agoAI Score37
The value of optimal trading filters and predictive signals
Optimal Trading Filters and the Value of Predictive Signals
AI summary
This paper addresses the stationary quadratic trading problem with transient price impact, deriving optimal trading strategies using predictive theory tools, expressed as a combination of conditional predictions and explicit causal linear filters. The paper recovers the Gârleanu-Pedersen target portfolio under the exponential elasticity assumption, derives fractional trading filters under power-law impact decay, and clarifies the mechanisms determining the net realizable value of predictive signals under different trading cost scenarios.
Source:arXiv q-fin · arxiv.org
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