Reinforcement learning for optimized trade execution

Yuriy Nevmyvaka, Yi Feng, Michael J. Kearns

Abstract: We present the first large-scale empirical application of reinforcement learning to the important problem of optimized trade execution in modern financial markets. Our experiments are based on 1.5 years of millisecond time-scale limit order data from NASDAQ, and demonstrate the promise of reinforcement learning methods to market microstructure problems. Our learning algorithm introduces and exploits a natural "low-impact" factorization of the state space.