Optimal sale strategies in illiquid markets
(2005) In Mathematical Methods of Operations Research 61(2). p.173-190- Abstract
- The value of a position in a risky asset when optimally sold in an illiquid market is considered. The optimization problem is described as a stochastic impulse control problem, and it is shown that it is related to solving a system of quasi-variational inequalities. Existence of a solution to these inequalities are proved. A numerical implementation of the valuation algorithm is discussed and two numerical examples are presented. Further, two examples where the stochastic impulse control problem can be reduced to deterministic optimization problems are also given.
Please use this url to cite or link to this publication:
https://lup.lub.lu.se/record/240016
- author
- Dahlgren, Martin LU
- organization
- publishing date
- 2005
- type
- Contribution to journal
- publication status
- published
- subject
- keywords
- liquidity discount, stochastic impulse control, HJB quasi-variational inequalities, large sales
- in
- Mathematical Methods of Operations Research
- volume
- 61
- issue
- 2
- pages
- 173 - 190
- publisher
- Physica Verlag
- external identifiers
-
- wos:000229188800001
- scopus:18844382648
- ISSN
- 1432-2994
- DOI
- 10.1007/s00186-005-0421-x
- language
- English
- LU publication?
- yes
- id
- 23967366-a5cc-4e3c-98d2-d5bf68063c26 (old id 240016)
- date added to LUP
- 2016-04-01 17:00:22
- date last changed
- 2022-01-28 23:39:25
@article{23967366-a5cc-4e3c-98d2-d5bf68063c26, abstract = {{The value of a position in a risky asset when optimally sold in an illiquid market is considered. The optimization problem is described as a stochastic impulse control problem, and it is shown that it is related to solving a system of quasi-variational inequalities. Existence of a solution to these inequalities are proved. A numerical implementation of the valuation algorithm is discussed and two numerical examples are presented. Further, two examples where the stochastic impulse control problem can be reduced to deterministic optimization problems are also given.}}, author = {{Dahlgren, Martin}}, issn = {{1432-2994}}, keywords = {{liquidity discount; stochastic impulse control; HJB quasi-variational inequalities; large sales}}, language = {{eng}}, number = {{2}}, pages = {{173--190}}, publisher = {{Physica Verlag}}, series = {{Mathematical Methods of Operations Research}}, title = {{Optimal sale strategies in illiquid markets}}, url = {{http://dx.doi.org/10.1007/s00186-005-0421-x}}, doi = {{10.1007/s00186-005-0421-x}}, volume = {{61}}, year = {{2005}}, }