Optimal Decision for Selling an Illiquid Stock

Baojun Bian (), Min Dai, Lishang Jiang (), Qing Zhang () and Yifei Zhong ()
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Baojun Bian: Tongji University
Lishang Jiang: Tongji University
Qing Zhang: The University of Georgia
Yifei Zhong: Oxford University

Journal of Optimization Theory and Applications, 2011, vol. 151, issue 2, No 11, 402-417

Abstract: Abstract This paper is concerned with liquidation of an illiquid stock. The stock price follows a fluid model which is dictated by the rates of selling and buying over time. The objective is to maximize the expected overall return. The method of constrained viscosity solution is used to characterize the dynamics governing the optimal reward function and the associated boundary conditions. Numerical examples are given to illustrate the results.

Keywords: Optimal control; State constraint; Selling rule (search for similar items in EconPapers)
Date: 2011
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DOI: 10.1007/s10957-011-9897-0

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