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arXiv · 2107.08489

Stochastic Maximum Principle for Optimal Liquidation with Control-dependent Terminal Time

Riccardo Cesari·Harry Zheng
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Abstract

In this paper we study a general optimal liquidation problem with a control-dependent stopping time which is the first time the stock holding becomes zero or a fixed terminal time, whichever comes first. We prove a stochastic maximum principle (SMP) which is markedly different in its Hamiltonian condition from that of the standard SMP with fixed terminal time. We present a simple example in which the optimal solution satisfies the SMP in this paper but fails the standard SMP in the literature.

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Riccardo Cesari, Harry Zheng. 2021-07-18. Stochastic Maximum Principle for Optimal Liquidation with Control-dependent Terminal Time. https://arxiv.org/abs/2107.08489

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