Optimal liquidation with additional information.

Authors
Publication date
2016
Publication type
Journal Article
Summary We consider the problem of how to optimally close a large assetposition in a market with a linear temporary price impact. We take the perspectiveof an agent who obtains a signal about the future price evolvement.By means of classical stochastic control we derive explicit formulas for the closingstrategy that minimizes the expected execution costs. We compare agentsobserving the signal with agents who do not see it. We compute explicitly theexpected additional gain due to the signal, and perform a comparative staticsanalysis.
Publisher
Springer Verlag
Topics of the publication
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