A trading algo (algorithm) that is used by electronic traders to execute orders on a basket of securities simultaneously (i.e., optimized multiple trades). It is used to manage the tradeoff between cost and basket risk taking into consideration a user’s risk aversion preferences. In other words, this algorithm considers risk minimization, access to cash targets, and investment in a number of asset classes at the same time. Trading takes place in real time with a particular attention to how buy and sell orders will affect the performance of the basket. For instance, a basket algorithm may be set to slow on trading, even at times of liquidity and advantageous market conditions, should this trading would negatively impact the residual risk of the basket.
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