Order Placement Optimization in Tehran Securities Exchange

In the present work, the problem of order execution is studied. Execution risk and market impact are taken into consideration to reach an optimum order placement strategy. New strategies are provided in this research, to improve performance of the basic model which is represented by Mandes (2015). Focus of this research is on implementation strategies in order to minimize the summation of execution cost and execution risk. Market impact modeling is considered for execution cost modeling. Furthermore, by considering parameters of liquidity such as imbalance in limit order book, spread, market depth, trade volume, price volatility and deviation of volumes in LOB as parameters of execution risk, order placement problem is optimized. Results of the suggested strategies indicate better performance in comparison to Mandes’s strategy and market strategy (which is the most popular strategy between traders in Tehran’s stock exchange).