Optimal Trading Strategy with Optimal Horizon
Edward E. Qian
Volume 6, Number 3, Third Quarter 2008
Portfolio implementation is an essential part of active investment strategies. The trading horizon-the length of time allocated for trade implementation, is an important consideration in portfolio trading. Previous research on optimal trading limits the trading horizon as a fixed value. In this paper, we treat it as an endogenous factor and find the optimal trading horizon as a part of optimal trading strategy to further reduce trading costs. We derive analytical results for optimal trading strategy with optimal horizon and provide numerical examples for illustration.