Determine the optimal liquidation quantity, Financial Accounting

The bid-offer spread as a function of daily trading volume is given by :p(q) = a + b*exp(cq)
where q = daily trading volume

a = 0.08
b= 0.10
c = 0.05

A trader wants to unwind a position of 50 million units over a period of 3 days. The daily volatility of price change of the position is $0.50. Determine the optimal liquidation quantity for each day if the trader wants to minimize liquidation and market risk costs with a confidence level of 95% (λ = 1.64).

Posted Date: 3/25/2013 4:17:59 AM | Location : United States







Related Discussions:- Determine the optimal liquidation quantity, Assignment Help, Ask Question on Determine the optimal liquidation quantity, Get Answer, Expert's Help, Determine the optimal liquidation quantity Discussions

Write discussion on Determine the optimal liquidation quantity
Your posts are moderated
Related Questions
Q. Explain about Financial Accounting Standards? Financial Accounting Standards - Official promulgations, also called STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS, by FINANCIAL

On January 1, 2010, Jacob issues $800,000 of 9%, 13-year bonds at a price of 96½. Six years later, on January 1, 2016, Jacob retires 20% of these bonds by buying them on the open m

methods of preparation of trial balance


In May of 2010 a calendar year taxpayer, placed in service $2,137,000 of USED 15-year recovery property. The taxpayer has taxable income of $1,175,000 before the cost recover

In the NPV analysis, sunk cost is not relevant whereas opportunity cost is for project evaluation. Requirements: Describe and justify the above statement about sunk cost an

What do you mean by base case NPV?

A company has the following forecast demand for the next five months: 1,600, 2,400, 3,200, 2,800, and 2,400. The following information is also available.                  curren

1. Will implementing SAP R/3 across the entire PCD division provide the division with a competitive advantage?  Justify your answer carefully. 2. The Raleigh team promised IBM c

An accountant made the following adjustments at December 31, the end of the accounting period: a. Prepaid insurance, beginning, $400. Payments for insurance during the period, $1,2