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Optimal liquidation of a call spread
Published online by Cambridge University Press: 14 July 2016
Abstract
We study the optimal liquidation strategy for a call spread in the case when an investor, who does not hedge, believes in a volatility that differs from the implied volatility. The liquidation problem is formulated as an optimal stopping problem, which we solve explicitly. We also provide a sensitivity analysis with respect to the model parameters.
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- Research Article
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- Copyright © Applied Probability Trust 2010
Footnotes
Support from the Swedish Research Council (VR) is gratefully acknowledged.
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