Optimal Execution: the Almgren-Chriss Frontier

Unwind a big position too fast and you pay huge market impact; too slow and you carry price risk the whole time. Almgren-Chriss makes the trade-off precise, and we trace its efficient frontier (via finmlsim) — the per-order companion to Mission 8’s portfolio-level cost of trading.

Key takeaways

1. 1.Impact vs. timing risk is the core execution trade-off — faster cuts risk but costs impact.
2. 2.Risk aversion (λ) picks your point on the frontier; there is no single optimal speed.
3. 3.Impact is convex in size — which is why capacity (Mission 8) is finite.