| Article ID: | iaor201110519 |
| Volume: | 151 |
| Issue: | 2 |
| Start Page Number: | 402 |
| End Page Number: | 417 |
| Publication Date: | Nov 2011 |
| Journal: | Journal of Optimization Theory and Applications |
| Authors: | Zhang Qing, Jiang Lishang, Bian Baojun, Dai Min, Zhong Yifei |
| Keywords: | investment, programming: dynamic |
This paper is concerned with liquidation of an illiquid stock. The stock price follows a fluid model which is dictated by the rates of selling and buying over time. The objective is to maximize the expected overall return. The method of constrained viscosity solution is used to characterize the dynamics governing the optimal reward function and the associated boundary conditions. Numerical examples are given to illustrate the results.