We model the interactions between the trading activities of a large investor, the stock price and the market liquidity. Our framework generalizes the model of Frey (2000), where liquidity is constant by introducing a stochastic liquidity factor. This innovation has two implications. First, we...

We model the interactions between the trading activities of a large investor, the stock price and the market liquidity. Our framework generalizes the model of Frey (2000), where liquidity is constant by introducing a stochastic liquidity factor. This innovation has two implications. First, we...

This article investigates static liquidation strategies for large security positions in illiquid markets. Under the assumption that the liquidation horizon is given exogenously, a discretionary liquidity trader solves for the optimal sales trajectory so as to maximize an objective function that...

This volume considers trading strategies in illiquid markets from three perspectives. The first chapter presents an innovative approach to investigate the interactions between the trading activities of a large investor, the stock price, and liquidity. The framework generalizes existing models by...