Optimal execution of accelerated share repurchase contracts with fixed notional

Olivier Guéant

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Abstract: Be it for taking advantage of stock undervaluation or in order to distribute part of their profits to shareholders, firms may buy back their own shares. One of the way they proceed is by including Accelerated Share Repurchases (ASR) as part of their repurchase programs. In this article, we study the pricing and optimal execution strategy of an ASR contract with fixed notional. In such a contract the firm pays a fixed notional F to the bank and receives, in exchange, a number of shares corresponding to the ratio between F and the average stock price over the purchase period, the duration of this period being decided upon by the bank. From a mathematical point of view, the problem is related to both optimal execution and exotic option pricing.

Date: 2017
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Published in The Journal of Risk, 2017, 19 (5), pp.77-99. ⟨10.21314/JOR.2017.361⟩

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Working Paper: Optimal execution of accelerated share repurchase contracts with fixed notional (2017)
Working Paper: Optimal execution of accelerated share repurchase contracts with fixed notional (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04590217

DOI: 10.21314/JOR.2017.361

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