[1] Zhong Liming, Liu Hailong, Wu Chongfeng,. Optimal control strategy of institutional investor’s execution cost [J]. Journal of Southeast University (English Edition), 2004, 20 (2): 240-244. [doi:10.3969/j.issn.1003-7985.2004.02.024]

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Optimal control strategy of institutional investor’s execution cost()

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Journal of Southeast University (English Edition)[ISSN:1003-7985/CN:32-1325/N]

Volumn:

20

Issue:

2004 2

Page:

240-244

Research Field:

Economy and Management

Publishing date:

2004-06-30

Info

Title:

Optimal control strategy of institutional investor’s execution cost

Author(s):

Zhong Liming;  Liu Hailong;  Wu Chongfeng

School of Management, Shanghai Jiaotong University, Shanghai 200052, China

Keywords:

liquidation;  execution cost;  optimal control

PACS:

F830

DOI:

10.3969/j.issn.1003-7985.2004.02.024

Abstract:

Optimal control of multi-assets liquidation in view of volatility risk was studied. The analytical solution of optimal strategy was achieved with the calculus of variation. Numerical examples and graphical illustrations were also given. The conclusion shows that the optimal strategy is the linear combination of time’s hyperbolic sine and hyperbolic cosine. The investor’s attitude towards risk can influence the optimal strategy. In order to avoid the uncertainty of the execution cost, the investor with high risk aversion liquidates assets rapidly in the early period. The decrease of liquidation loss is at the cost of the increase of the volatility level.

References:

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Memo

Memo:

Biographies: Zhong Liming(1976—), male, graduate; Liu Hailong(corresponding author), male, professor, hlliu@sjtu.edu.cn.

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