Optimal liquidation strategies and their implications

• Main Authors: TING, Christopher, WARACHKA, Mitch, ZHAO, Yonggan
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2007
• Subjects: Stochastic control; Trading strategy; Liquidity risk; Transaction costs; Stochastic volatility; Finance and Financial Management; Portfolio and Security Analysis
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/2697; https://ink.library.smu.edu.sg/context/lkcsb_research/article/3696/viewcontent/OptimalLiquidationStrategiesImplications_2007.pdf
• Institution: Singapore Management University

This paper studies optimal liquidation when the selling price depends on the rate of liquidation, transaction time, volume, and the asset's intrinsic value. A generic closed-form solution for maximizing the discounted liquidation proceeds is derived. To obtain financial insights, three parametr...