ABSTRACT
What is the optimal pace to build or unwind a position? In this chapter, we present the modeling framework introduced by Almgren and Chriss to schedule execution, and therefore to answer this important question. We first present the ideas that made the Almgren-Chriss approach a success. Then, we build a general model – inspired by the initial models presented in [8, 9] – for determining the optimal trading curve associated with buying or selling a large block of shares. This model is presented both in continuous time, for introducing the general framework, and in discrete time, because the discretetime formulation is useful when it comes to numerics.
