Utility maximization in an illiquid market

H. Mete Soner, M. Vukelja

Research output: Contribution to journalArticle

3 Scopus citations

Abstract

We consider a stochastic optimization problem of maximizing the expected utility from terminal wealth in an illiquid market. A discrete time model is constructed with few additional state variables. The dynamic programming approach is then developed and used for numerical studies. No-arbitrage conditions were also discussed.

Original languageEnglish (US)
Pages (from-to)692-706
Number of pages15
JournalStochastics
Volume85
Issue number4
DOIs
StatePublished - Jun 4 2013
Externally publishedYes

All Science Journal Classification (ASJC) codes

  • Statistics and Probability
  • Modeling and Simulation

Keywords

  • dynamic programming
  • limit order book
  • liquidity risk
  • price impact
  • utility maximization

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