![Optimal liquidation strategies and their implications [An article from: Journal of Economic Dynamics and Control]](http://ecx.images-amazon.com/images/I/51S8Q075X2L.jpg)
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This digital document is a journal article from Journal of Economic Dynamics and Control, published by Elsevier in 2007. The article is delivered in HTML format and is available in your Amazon.com Media Library immediately after purchase. You can view it with any web browser.
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This paper studies optimal liquidation when the selling price depends on the rate of liquidation, transaction time, volume, and the asset’s intrinsic value. A generic closed-form solution for maximizing the discounted liquidation proceeds is derived. To obtain financial insights, three parametric specifications that proxy for increasingly realistic market conditions are examined. In our framework, maximizing liquidation proceeds and minimizing liquidity costs are equivalent. The optimal strategies imply more rapid liquidations in less liquid markets. We also show that volatility is stochastic when market liquidity is unpredictable.
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