Title: Optimal liquidation with jump-diffusion process

Authors: Qixuan Luo; Can Jia; Handong Li

Addresses: School of Systems Science, Beijing Normal University, Beijing 100875, China ' School of Systems Science, Beijing Normal University, Beijing 100875, China ' School of Systems Science, Beijing Normal University, Beijing 100875, China

Abstract: Under the assumption of the asset prices obey jump-diffusion process, static optimal liquidation strategies and efficient frontier are provided based on the mean-variance criterion and the minimum loss probability criterion separately. Furthermore, this paper analysed the impact of price jump component on optimal liquidation strategy. And the results indicate that, under the mean-variance criterion, the price jump component will change the trajectory of the optimal liquidation strategy and the final liquidation cost. While under the minimum loss probability criterion, the price jump component will not affect the optimal liquidation strategy, but will change the value of minimum loss probability.

Keywords: price process; jump component; price impact; optimal liquidation strategy; efficient frontier.

DOI: 10.1504/IJADS.2021.117456

International Journal of Applied Decision Sciences, 2021 Vol.14 No.5, pp.542 - 564

Received: 28 Aug 2019
Accepted: 17 May 2020
Published online: 07 Sep 2021 *

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