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### Optimal liquidation of derivative portfolios

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Henderson, Vicky and Hobson, David (David G.).
(2010)
*Optimal liquidation of derivative portfolios.*
Mathematical Finance, Volume 21
(Number 3).
pp. 365-382.
ISSN 0960-1627

**Full text not available from this repository.**

Official URL: http://dx.doi.org/10.1111/j.1467-9965.2010.00455.x

## Abstract

We consider the problem facing a risk averse agent who seeks to liquidate or exercise a portfolio of (infinitely divisible) perpetual American style options on a single underlying asset. The optimal liquidation strategy is of threshold form and can be characterized explicitly as the solution of a calculus of variations problem. Apart from a possible initial exercise of a tranche of options, the optimal behavior involves liquidating the portfolio in infinitesimal amounts, but at times which are singular with respect to calendar time. We consider a number of illustrative examples involving CRRA and CARA utility, stocks, and portfolios of options with different strikes, and a model where the act of exercising has an impact on the underlying asset price.

Item Type: | Journal Article |
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Subjects: | H Social Sciences > HG Finance |

Divisions: | Faculty of Science > Statistics |

Library of Congress Subject Headings (LCSH): | Portfolio management, Liquidation, Derivative securities |

Journal or Publication Title: | Mathematical Finance |

Publisher: | Wiley-Blackwell Publishing, Inc. |

ISSN: | 0960-1627 |

Official Date: | 2010 |

Volume: | Volume 21 |

Number: | Number 3 |

Page Range: | pp. 365-382 |

Identification Number: | 10.1111/j.1467-9965.2010.00455.x |

Status: | Peer Reviewed |

Publication Status: | Published |

References: | ALMGREN, R. (2003): Optimal Execution with Nonlinear Impact Functions and Tradingenhanced |

URI: | http://wrap.warwick.ac.uk/id/eprint/41308 |

Data sourced from Thomson Reuters' Web of Knowledge

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