Design and Implementation of Schedule-Based Trading Strategies Based on Uncertainty Bands

TL;DR

This paper introduces a flexible and easily implementable schedule-based trading strategy framework utilizing uncertainty bands, enabling strategic and tactical decision-making and rapid adaptation to new optimization and execution techniques.

Contribution

The paper presents a novel framework for schedule-based trading strategies that simplifies implementation and enhances flexibility using uncertainty bands.

Findings

Simplifies strategy specification and implementation

Supports diverse execution tactics including passive and dark pool crossing

Facilitates rapid integration of new optimization and scheduling methods

Abstract

We propose a design for schedule-based execution trading strategies based on uncertainty bands. This formulation: 1) simplifies strategy specification and implementation; 2) provides for flexible allocation among passive, opportunistic, aggressive, and dark pool crossing execution tactics; 3) allows for rapid enhancements as new optimization methods, scheduling techniques, alpha models, and execution tactics are developed; and 4) yields information at macroscopic (strategic) and microscopic (tactical) levels that is easily published to trading databases and front-end applications.