Optimal Liquidation Strategies in Illiquid Markets
Details
Serval ID
serval:BIB_4841E4F5BC52
Type
Report: a report published by a school or other institution, usually numbered within a series.
Publication sub-type
Working paper: Working papers contain results presented by the author. Working papers aim to stimulate discussions between scientists with interested parties, they can also be the basis to publish articles in specialized journals
Collection
Publications
Institution
Title
Optimal Liquidation Strategies in Illiquid Markets
Institution details
Swiss Finance Institute
Address
Switzerland
Issued date
2007
Number
09-24
Genre
Research Paper
Language
english
Notes
New version: August 2009
Abstract
In this paper, we study the economic relevance of optimal liquidation strategies by calibrating a recent and realistic microstructure model with data from the Paris Stock Exchange. We distinguish the case of parameters which are constant through the day from time-varying ones. An optimization problem incorporating this realistic microstructure model is presented and solved. Our model endogenizes the number of trades required before the position is liquidated. A comparative
static exercise demonstrates the realism of our model. We Önd that a sell decision taken in the morning will be liquidated by the early afternoon. If price impacts increase over the day, the liquidation will take place more rapidly.
static exercise demonstrates the realism of our model. We Önd that a sell decision taken in the morning will be liquidated by the early afternoon. If price impacts increase over the day, the liquidation will take place more rapidly.
Keywords
Optimal execution strategy, liquidity risk, price impact, high frequency data, microstructure
Create date
03/05/2010 13:25
Last modification date
21/08/2019 6:16
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