Work

A convex duality method for optimal liquidation with participation constraints

Year: 2014

Type: article

Abstract: In spite of the growing consideration for optimal execution in the financial mathematics literature, numerical approximations of optimal trading curves are almost never discussed. In this article, we present a numerical method to approximate the optimal strategy of a trader willing to unwind a large portfolio. The method we propose is very general as it can be applied to multi-asset portfolios with any form of execution costs, including a bid-ask spread component, even when participation constraints are imposed. Our method, based on convex duality, only requires Hamiltonian functions to have $C^{1,1}$ regularity while classical methods require additional regularity and cannot be applied to all cases found in practice.

Source: Base Institutionnelle de Recherche de l'université Paris-Dauphine (BIRD) (University Paris-Dauphine)

DOI: 10.48550/arxiv.1407.4614

Authors: Guéant, Olivier, Lasry, Jean-Michel, Pu, Jiang

Institutions: Laboratoire Jacques-Louis Lions, Centre de Recherche en Mathématiques de la Décision

Language: English

Topic: Stochastic processes and financial applications

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W2952380091

FWCI:

Cites: 26

Cited by: 2

Related to: 10