Speaker: Dr.Jing Xu (Renmin University of china)

Title: Optimal Liquidation and Acquisition with Transitory Price Impact

Time: Tue, Nov.20, 2018 , AM:10:00-10:40

Location: Room 4318, Building No.4, Wushan Campus 

Abstract:

        Financial institutions often need to liquidate or acquire a large position in an illiquid market by a certain date. We propose a unified dynamic model of optimal liquidation and optimal acquisition with transitory price impact that can be a general function of trading speed. We find that both the optimal liquidation speed and the optimal acquisition speed are U shaped functions of time.   

        Moreover, it can be optimal to trade against the intended target when marketcondition is favorable and the time to horizon is long. We also show naive trading strategies such as trading at a constant speed can be costly.