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Optimal gradual liquidation of equity from a risky asset

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Authors
Dokuchaev, Nikolai
Date
2010
Type
Journal Article

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Dokuchaev, Nikolai. 2010. Optimal gradual liquidation of equity from a risky asset. Applied Economic Letters. 17 (13): pp. 1305-1308.
Source Title
Applied Economic Letters
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School of Science and Computing
Department of Mathematics and Statistics
Faculty of Science and Engineering
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Abstract

We consider a problem of optimal gradual liquidation of equity from a risky asset for continuous time stochastic market model.The owner of the risky asset uses this equity as a source of steady cash flow by borrowing money permanently against this equity. At the terminal time, there is no equity for him in this asset, and the bank gains ownership of this asset. Optimal strategy is obtained explicitly.