Title: Static vs Adaptive Strategies for Optimal Execution with Signals,
Abstract: We consider an optimal execution problem in which a trader is looking at a
short-term price predictive signal while trading. In the case where the trader
is creating an instantaneous market impact, we show that transactions costs
resulting from the optimal adaptive strategy are substantially lower than the
corresponding costs of the optimal static strategy. Later, we investigate the
case where the trader is creating transient market impact. We show that
strategies in which the trader is observing the signal a number of times during
the trading period, can dramatically reduce the transaction costs and improve
the performance of the optimal static strategy. These results answer a question
which was raised by Brigo and Piat [6], by analyzing two cases where adaptive
strategies can improve the performance of the execution.