Utility Maximization in an Illiquid Market

Halil Mete Soner and Mirjana Vukelja
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Halil Mete Soner: ETH Zürich; Swiss Finance Institute
Mirjana Vukelja: Independent

No 13-17, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: We consider a stochastic optimization problem of maximizing the expected utility from terminal wealth in an illiquid market. A discrete time model is constructed with few additional state variables. The dynamic programming approach is then developed and used for numerical studies. No-arbitrage conditions were also discussed.

Keywords: Liquidity risk; limit order book; price impact; utility maximization; dynamic programming (search for similar items in EconPapers)
JEL-codes: D40 G11 G12 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2013-04
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp1317

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