The liquidity discount. (Q2770983)
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scientific article; zbMATH DE number 1704435
| Language | Label | Description | Also known as |
|---|---|---|---|
| English | The liquidity discount. |
scientific article; zbMATH DE number 1704435 |
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2001
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liquidity risk
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impulse control
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value at risk
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0.75853324
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0.75515676
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The liquidity discount. (English)
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This paper characterizes the liquidity discount, which is the difference between the market value of a trader's position and its value when liquidated, by formulating the trader's optimal liquidation decision problem as a stochastic impulse control problem. The characterization enables one to modify the standard value-at-risk computation to include liquidity risk.
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