Optimal liquidation strategies

 

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dc.contributor.advisor Maritz, EJ en_ZA
dc.contributor.advisor Guo, Renkuan en_ZA
dc.contributor.author Ennis, Michael en_ZA
dc.date.accessioned 2014-10-06T11:24:17Z
dc.date.available 2014-10-06T11:24:17Z
dc.date.issued 2006 en_ZA
dc.identifier.citation Ennis, M. 2006. Optimal liquidation strategies. University of Cape Town. en_ZA
dc.identifier.uri http://hdl.handle.net/11427/8119
dc.description Includes bibliographical references. en_ZA
dc.description.abstract Liquidation strategies consider the problem of minimising transaction costs occurring in a portfolio liquidation. Transaction costs are the difference between current market value and the realised value after the liquidation. A strategy to follow to perform a liquidation is especially important to institutional investors due the large size of their trades. Large trades can have a significant effect on the price of a security which can impact the realised returns of the liquidation. These models solve for trading trajectories that maximise this. The models investigated do this in a mean-variance framework where the expected return of the strategy is constrained by its variance and the investors risk preference. Parameters used in liquidity functions are estimated for securities on the South African JSE Securities Exchange. The effects of security liquidity, volatility, stock correlation and length of liquidation horizon on the optimal strategy are investigated. There is little or no existing literature that attempts to model these functions in the South African market. Due to the smaller size of the South African market as well as the number of thinly traded shares compared to most markets studied in the literature, many securities are highly illiquid. We investigate relationships between firm size and daily traded value and these liquidity parameters. General rules are presented to help traders improve a liquidation strategy without the need to estimate all parameters needed to calculate an optimal strategy using one of these models. en_ZA
dc.language.iso eng en_ZA
dc.subject.other Mathematical Finance en_ZA
dc.title Optimal liquidation strategies en_ZA
dc.type Master Thesis
uct.type.publication Research en_ZA
uct.type.resource Thesis en_ZA
dc.publisher.institution University of Cape Town
dc.publisher.faculty Faculty of Science en_ZA
dc.publisher.department Department of Mathematics and Applied Mathematics en_ZA
dc.type.qualificationlevel Masters
dc.type.qualificationname MSc en_ZA
uct.type.filetype Text
uct.type.filetype Image
dc.identifier.apacitation Ennis, M. (2006). <i>Optimal liquidation strategies</i>. (Thesis). University of Cape Town ,Faculty of Science ,Department of Mathematics and Applied Mathematics. Retrieved from http://hdl.handle.net/11427/8119 en_ZA
dc.identifier.chicagocitation Ennis, Michael. <i>"Optimal liquidation strategies."</i> Thesis., University of Cape Town ,Faculty of Science ,Department of Mathematics and Applied Mathematics, 2006. http://hdl.handle.net/11427/8119 en_ZA
dc.identifier.vancouvercitation Ennis M. Optimal liquidation strategies. [Thesis]. University of Cape Town ,Faculty of Science ,Department of Mathematics and Applied Mathematics, 2006 [cited yyyy month dd]. Available from: http://hdl.handle.net/11427/8119 en_ZA
dc.identifier.ris TY - Thesis / Dissertation AU - Ennis, Michael AB - Liquidation strategies consider the problem of minimising transaction costs occurring in a portfolio liquidation. Transaction costs are the difference between current market value and the realised value after the liquidation. A strategy to follow to perform a liquidation is especially important to institutional investors due the large size of their trades. Large trades can have a significant effect on the price of a security which can impact the realised returns of the liquidation. These models solve for trading trajectories that maximise this. The models investigated do this in a mean-variance framework where the expected return of the strategy is constrained by its variance and the investors risk preference. Parameters used in liquidity functions are estimated for securities on the South African JSE Securities Exchange. The effects of security liquidity, volatility, stock correlation and length of liquidation horizon on the optimal strategy are investigated. There is little or no existing literature that attempts to model these functions in the South African market. Due to the smaller size of the South African market as well as the number of thinly traded shares compared to most markets studied in the literature, many securities are highly illiquid. We investigate relationships between firm size and daily traded value and these liquidity parameters. General rules are presented to help traders improve a liquidation strategy without the need to estimate all parameters needed to calculate an optimal strategy using one of these models. DA - 2006 DB - OpenUCT DP - University of Cape Town LK - https://open.uct.ac.za PB - University of Cape Town PY - 2006 T1 - Optimal liquidation strategies TI - Optimal liquidation strategies UR - http://hdl.handle.net/11427/8119 ER - en_ZA


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