A note on optimal liquidation with linear price impact

In this note the maximization of the expected terminal wealth for the setup of quadratic transaction costs is considered. First, a very simple probabilistic solution to the problem is provided. Although the problem was largely studied, as far as authors know up to date this simple and probabilistic form of the solution has not appeared in the literature. Next, the general result is applied for the numerical study of the case where the risky asset is given by a fractional Brownian motion and the information flow of the investor can be diversified.

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Publication Details

Journal
Modern Stochastics Theory and Applications
Published
2024-08-20
DOI
https://doi.org/10.15559/24-vmsta264
Primary Topic
Stochastic processes and financial applications
Type
article
Field-Weighted Citation Impact
0.00

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article

A note on optimal liquidation with linear price impact

Yan Dolinsky, Doron Greenstein
Modern Stochastics Theory and Applications
Stochastic processes and financial applications
article

A note on optimal liquidation with linear price impact

Yan Dolinsky, Doron Greenstein
article en

Abstract

In this note the maximization of the expected terminal wealth for the setup of quadratic transaction costs is considered. First, a very simple probabilistic solution to the problem is provided. Although the problem was largely studied, as far as authors know up to date this simple and probabilistic form of the solution has not appeared in the literature. Next, the general result is applied for the numerical study of the case where the risky asset is given by a fractional Brownian motion and the information flow of the investor can be diversified.

Modern Stochastics Theory and Applications
Hebrew University of Jerusalem (IL)
Israel Science Foundation
Decent work and economic growth
Openalex Percentile: Top 80%
Stochastic processes and financial applications
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