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Reducing the risk of VWAP orders execution - A new approach to modeling intra-day volume

Bialkowski, Jedrzej; Darolles, Serge; Le Fol, Gaëlle (2012), Reducing the risk of VWAP orders execution - A new approach to modeling intra-day volume, JASSA, 1, p. 12-18

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Type
Article accepté pour publication ou publié
Date
2012
Journal name
JASSA
Number
1
Publisher
International Arts & Sciences Press
Pages
12-18
Metadata
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Author(s)
Bialkowski, Jedrzej

Darolles, Serge
Dauphine Recherches en Management [DRM]
Le Fol, Gaëlle
Dauphine Recherches en Management [DRM]
Abstract (EN)
This paper proposes a new dynamic approach to modelling intra-day trading volume based on factor models. It assumes that intra-day volume can be decomposed into two parts each predicted using separate time-series models. By enabling more accurate prediction of intra-day volume, this methodology allows for a significant reduction in the cost of executing Volume weighted Average Price orders.
Subjects / Keywords
intra-day trading volume; execution risk; Volume Weighted Average Price order; trading costs in securities markets; Modeling
JEL
C22 - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
D81 - Criteria for Decision-Making under Risk and Uncertainty
G13 - Contingent Pricing; Futures Pricing
G11 - Portfolio Choice; Investment Decisions
C58 - Financial Econometrics
G12 - Asset Pricing; Trading Volume; Bond Interest Rates