Optimal Liquidation Strategy of Multi-assets Based on Minimum Loss Probability

Abstract

Based on the minimum loss probability criterion, this paper discusses the optimal strategy in multi-asset liquidation. First, we give the framework of the multi-asset liquidation problem and obtain the boundary conditions of the optimal liquidation strategy under the assumption of linear price impact functions and transform the multi-asset liquidation problem into the portfolio liquidation problem. On this basis, the asymptotic solution and numerical solution of the optimal liquidation strategy are obtained. Then, we simulate the trajectories of the optimal liquidation strategy and analyze the effects of parameters changes.

Keywords

Minimum loss probability / multi-asset liquidation / permanent impact / temporary impact / optimal liquidation strategy

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