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- Publisher Website: 10.1016/j.frl.2024.105043
- Scopus: eid_2-s2.0-85186369488
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Article: Viscosity solution for optimal liquidation problems with randomly-terminated horizon
Title | Viscosity solution for optimal liquidation problems with randomly-terminated horizon |
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Authors | |
Keywords | Hamilton–Jacobi–Bellman equation Optimal liquidation strategies Viscosity solution |
Issue Date | 1-Mar-2024 |
Publisher | Elsevier |
Citation | Finance Research Letters, 2024, v. 61 How to Cite? |
Abstract | In this paper, we study an optimal liquidation problem of a stressed asset, for which its value is modeled by a geometric Brownian motion. The default time of the stressed asset, therefore, becomes stochastic and predictable. Hence we deal with the optimal liquidation problem in a randomly-terminated horizon. We consider the liquidation of a large single-asset portfolio with the aim of minimizing a combination of volatility risk and transaction costs arising from permanent and temporary market impacts. We prove that the value function is the unique viscosity solution to the Hamilton–Jacobi–Bellman (HJB) equation of the considered optimal liquidation problem. |
Persistent Identifier | http://hdl.handle.net/10722/348368 |
ISSN | 2023 Impact Factor: 7.4 2023 SCImago Journal Rankings: 1.903 |
DC Field | Value | Language |
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dc.contributor.author | Yang, Qing Qing | - |
dc.contributor.author | Ching, Wai Ki | - |
dc.contributor.author | Gu, Jia wen | - |
dc.contributor.author | Wong, Tak Kwong | - |
dc.contributor.author | Zhu, Dong Mei | - |
dc.date.accessioned | 2024-10-09T00:31:03Z | - |
dc.date.available | 2024-10-09T00:31:03Z | - |
dc.date.issued | 2024-03-01 | - |
dc.identifier.citation | Finance Research Letters, 2024, v. 61 | - |
dc.identifier.issn | 1544-6123 | - |
dc.identifier.uri | http://hdl.handle.net/10722/348368 | - |
dc.description.abstract | In this paper, we study an optimal liquidation problem of a stressed asset, for which its value is modeled by a geometric Brownian motion. The default time of the stressed asset, therefore, becomes stochastic and predictable. Hence we deal with the optimal liquidation problem in a randomly-terminated horizon. We consider the liquidation of a large single-asset portfolio with the aim of minimizing a combination of volatility risk and transaction costs arising from permanent and temporary market impacts. We prove that the value function is the unique viscosity solution to the Hamilton–Jacobi–Bellman (HJB) equation of the considered optimal liquidation problem. | - |
dc.language | eng | - |
dc.publisher | Elsevier | - |
dc.relation.ispartof | Finance Research Letters | - |
dc.subject | Hamilton–Jacobi–Bellman equation | - |
dc.subject | Optimal liquidation strategies | - |
dc.subject | Viscosity solution | - |
dc.title | Viscosity solution for optimal liquidation problems with randomly-terminated horizon | - |
dc.type | Article | - |
dc.identifier.doi | 10.1016/j.frl.2024.105043 | - |
dc.identifier.scopus | eid_2-s2.0-85186369488 | - |
dc.identifier.volume | 61 | - |
dc.identifier.eissn | 1544-6131 | - |
dc.identifier.issnl | 1544-6131 | - |