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Article Dans Une Revue Stochastic Processes and their Applications Année : 2018

Smooth Solutions to Portfolio Liquidation Problems under Price-Sensitive Market Impact

Ulrich Horst
Eric Séré

Résumé

We consider the stochastic control problem of a financial trader that needs to unwind a large asset portfolio within a short period of time. The trader can simultaneously submit active orders to a primary market and passive orders to a dark pool. Our framework is flexible enough to allow for price-dependent impact functions describing the trading costs in the primary market and price-dependent adverse selection costs associated with dark pool trading. We prove that the value function can be characterized in terms of the unique smooth solution to a PDE with singular terminal value, establish its explicit asymptotic behavior at the terminal time, and give the optimal trading strategy in feedback form.
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Dates et versions

hal-01540537 , version 1 (16-06-2017)

Identifiants

Citer

Paulwin Graewe, Ulrich Horst, Eric Séré. Smooth Solutions to Portfolio Liquidation Problems under Price-Sensitive Market Impact. Stochastic Processes and their Applications, 2018, 128 (3), pp.979-1006. ⟨10.1016/j.spa.2017.06.013⟩. ⟨hal-01540537⟩
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