arbiter
JournalsAccount

Optimal Liquidation With Signals: The General Propagator Case

Eduardo Abi Jaber & Eyal Neuman

Mathematical Finance2025https://doi.org/10.1111/mafi.12465article
AJG 3ABDC A
Weight
0.46

Abstract

We consider a class of optimal liquidation problems where the agent's transactions create transient price impact driven by a Volterra‐type propagator along with temporary price impact. We formulate these problems as maximization of a revenue‐risk functionals, where the agent also exploits available information on a progressively measurable price predicting signal. By using an infinite dimensional stochastic control approach, we characterize the value function in terms of a solution to a free‐boundary ‐valued backward stochastic differential equation and an operator‐valued Riccati equation. We then derive analytic solutions to these equations, which yields an explicit expression for the optimal trading strategy. We show that our formulas can be implemented in a straightforward and efficient way for a large class of price impact kernels with possible singularities such as the power‐law kernel.

4 citations

Open via your library →

Cite this paper

https://doi.org/https://doi.org/10.1111/mafi.12465

Or copy a formatted citation

@article{eduardo2025,
  title        = {{Optimal Liquidation With Signals: The General Propagator Case}},
  author       = {Eduardo Abi Jaber & Eyal Neuman},
  journal      = {Mathematical Finance},
  year         = {2025},
  doi          = {https://doi.org/https://doi.org/10.1111/mafi.12465},
}

Paste directly into BibTeX, Zotero, or your reference manager.

Flag this paper

Optimal Liquidation With Signals: The General Propagator Case

Flags are reviewed by the Arbiter methodology team within 5 business days.

Evidence weight

0.46

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.37 × 0.4 = 0.15
M · momentum0.60 × 0.15 = 0.09
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.