Optimal basket liquidation with finite time horizon for CARA investors
نویسنده
چکیده
We consider the finite-time optimal basket liquidation problem for a von Neumann-Morgenstern investor with constant absolute risk aversion (CARA). As underlying continuous-time liquidity model, we use a multi-asset extension of the nonlinear price impact model of Almgren (2003). We show that the expected utility of sales revenues, taken over a large class of adapted strategies, is maximized by a unique deterministic strategy, which can be characterized by a Hamilton equation. Mathematicaly, the problem is equivalent to a control problem with finitefuel constraint, which we solve by observing that the corresponding value function solves a degenerate Hamilton-Jacobi-Bellman equation with singular initial condition.
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