Author
Dai, M
Jin, H
Liu, H
Journal title
Journal of Economic Theory
Issue
4
Volume
146
Last updated
2024-03-15T18:12:44.783+00:00
Page
1598-1630
Abstract
We study the optimal trading strategy of mutual funds that face both position limits and differential illiquidity. We provide explicit characterization of the optimal trading strategy and conduct an extensive analytical and numerical analysis of the optimal trading strategy. We show that the optimal trading boundaries are increasing in both the lower and the upper position limits. We find that position limits can affect current trading strategy even when they are not currently binding and other seemingly intuitive trading strategies can be costly. We also examine the optimal choice of position limits.
Symplectic ID
189419
Download URL
http://www.maths.ox.ac.uk/~jinh
Favourite
On
Publication type
Journal Article
Publication date
2011
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