Abstract
Optimal multi-asset trading with Markovian predictors is well understood in the case of quadratic transaction costs, but remains intractable when these costs are L1. We present a mean-field approach that reduces the multi-asset problem to a single-asset problem, with an effective predictor that includes a risk averse component. We obtain a simple approximate solution in the case of Ornstein-Uhlenbeck predictors and maximum position constraints. The optimal strategy is of the bang-bang type similar to that obtained in [de Lataillade et al., 2012]. When the risk aversion parameter is small, we find that the trading threshold is an affine function of the instantaneous global position, with a slope coefficient that we compute exactly. We provide numerical simulations that support our analytical results.
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