Optimal Liquidation with High Risk Aversion and Small Linear Price Impact
Mathematical Finance
2023-11-08 v2
Abstract
We consider the Bachelier model with linear price impact. Exponential utility indifference prices are studied for vanilla European options in the case where the investor is required to liquidate her position. Our main result is establishing a non-trivial scaling limit for a vanishing price impact which is inversely proportional to the risk aversion. We compute the limit of the corresponding utility indifference prices and find explicitly a family of portfolios which are asymptotically optimal.
Keywords
Cite
@article{arxiv.2301.01555,
title = {Optimal Liquidation with High Risk Aversion and Small Linear Price Impact},
author = {Leonid Dolinskyi and Yan Dolinsky},
journal= {arXiv preprint arXiv:2301.01555},
year = {2023}
}
Comments
arXiv admin note: text overlap with arXiv:2111.00451