Stochastic maximum principle for optimal liquidation with control-dependent terminal time (Q2674442)
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English | Stochastic maximum principle for optimal liquidation with control-dependent terminal time |
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Stochastic maximum principle for optimal liquidation with control-dependent terminal time (English)
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12 September 2022
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An optimal liquidation problem is modeled by a stochastic differential equation and an expectation-type objective function depending on a control-dependent random terminal time. Here, the terminal time is determined by the first time the stock holding becomes zero or a fixed terminal time, whichever occurs first. The objective is to maximize the expected cash value of the liquidation at the terminal time subject to the underlying state process (e.g. stock price, volatility). Based on a Hamiltonian method, with a random terminal time, a stochastic maximum principle is presented. Furthermore, an example is given.
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stochastic maximum principle
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control-dependent terminal time
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optimal liquidation
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variational analysis
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backwards stochastic differential equations
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