A sample-path approach to optimal position liquidation

Pavlo Krokhmal, Stanislav Uryasev

Research output: Contribution to journalArticlepeer-review

9 Scopus citations


We consider the problem of optimal position liquidation where the expected cash flow stream due to transactions is maximized in the presence of temporary or permanent market impact. A stochastic programming approach is used to construct trading strategies that differentiate decisions with respect to the observed market conditions, and can accommodate various types of trading constraints. As a scenario model, we use a collection of sample paths representing possible future realizations of state variable processes (price, trading volume etc.), and employ a heuristical technique of sample-path grouping, which can be viewed as a generalization of the standard nonanticipativity constraints.

Original languageEnglish (US)
Pages (from-to)193-225
Number of pages33
JournalAnnals of Operations Research
Issue number1
StatePublished - Jul 2007


  • Market impact
  • Optimal trading
  • Sample paths
  • Stochastic programming

ASJC Scopus subject areas

  • General Decision Sciences
  • Management Science and Operations Research


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