Optimal Trading with General Signals and Liquidation in Target Zone Models

We study optimal trading in an Almgren-Chriss model with running and terminal inventory costs and general predictive signals about price changes. As a special case, this allows to treat optimal liquidation in “target zone models”: asset prices with a reflecting boundary enforced by regulatory interventions. In this case, the optimal liquidation rate is the “theta” of a lookback option, leading to explicit formulas for Bachelier or Black-Scholes dynamics

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Year of publication:	2018
Authors:	Belak, Christoph
Other Persons:	Muhle-Karbe, Johannes (contributor) ; Ou, Kevin (contributor)
Publisher:	[2018]: [S.l.] : SSRN
Subject:	Theorie \| Theory \| Wechselkurspolitik \| Exchange rate policy \| Zielzone \| Target zone \| Signalling \| Asymmetrische Information \| Asymmetric information

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