5 We compare optimal liquidation policies in continuous time in the presence of trading impact using 6 numerical solutions of Hamilton Jacobi Bellman (HJB) partial differential equations (PDE). In par7 ticular, we compare the time-consistent mean-quadratic-variation strategy with the time-inconsistent 8 (pre-commitment) mean-variance strategy. We show that the two different risk measures lead t...

Many ...nancially distressed ...rms remain highly levered, invest little, and perform poorly after emerging from a debt restructuring. As a consequence, they often reenter distress shortly after the restructuring. This paper presents a theory of dynamic liquidation that is consistent with these ...ndings. Postponing the liquidation decision allows creditors to learn about the ...rm’s prospects ...

This paper studies the provision of deposit insurance along with liquidation decisions without commitment in an economy with heterogenous households. The analysis separates control of the balance sheet of a failed bank from the provision of deposit insurance. We study the factors that determine orderly liquidation and the effects of this policy on the prospect of bank runs. We also study the pr...

Why is the cost of resolving insurance company failures so high? Evidence in this article suggests that the state insurance regulatory bodies in charge of the liquidation process turn over an average of only $0.33 for each $1.00 of pre-insolvency assets to the guaranty funds (the state agencies responsible for paying claims). This very low “recovery rate” could result from ex ante regulatory fa...

This paper is concerned with multistage bidding models introduced by De Meyer and Moussa Saley (2002) to analyze the evolution of the price system at finance markets with asymmetric information. The zero-sum repeated games with incomplete information are considered modeling the bidding with countable sets of possible prices and admissible bids. It is shown that, if the liquidation price of a sh...

This paper develops trading strategies for liquidation of a financial security which maximize the expected return. The problem is formulated as a stochastic programming problem, which utilizes the scenario representation of possible returns. Two cases are considered, a case with no constraint on risk and a case when the risk of losses associated with trading strategy is constrained by Condition...

Momentum is the notion that an asset that has performed well in the past will continue to do so for some period. We study the optimal liquidation strategy for a momentum trade in a setting where the drift of the asset drops from a high value to a smaller one at some random change-point. This change-point is not directly observable for the trader, but it is partially observable in the sense that...

This paper unifies the recent analysis of macroeconomic fluctuations of [Brunnermeier and Sannikov(2012)], in which firms subject to financing constraints can sell capital in order to avoid liquidation, with the earlier related paper of [Milne and Robertson(1996)], in which firms manage cash flow, output and investment decisions in order to lower the probability of liquidation. This yields more...