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arXiv · 1312.2754

Liquidation of an indivisible asset with independent investment

Emilie Fabre·Guillaume Royer·Nizar Touzi
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Abstract

We provide an extension of the explicit solution of a mixed optimal stopping-optimal stochastic control problem introduced by Henderson and Hobson. The problem examines wether the optimal investment problem on a local martingale financial market is affected by the optimal liquidation of an independent indivisible asset. The indivisible asset process is defined by a homogeneous scalar stochastic differential equation, and the investor's preferences are defined by a general expected utility function. The value function is obtained in explicit form, and we prove the existence of an optimal stopping-investment strategy characterized as the limit of an explicit maximizing strategy. Our approach is based on the standard dynamic programming approach.

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Emilie Fabre, Guillaume Royer, Nizar Touzi. 2015-02-11. Liquidation of an indivisible asset with independent investment. https://arxiv.org/abs/1312.2754

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