THE OPTIMAL EXECUTION STRATEGY OF EMPLOYEE STOCK OPTIONS

Yi Fu; Baojun Bian; Jizhou Zhang; Dirk Linowski

doi:10.11948/2018.1122

2018 Volume 8 Issue 4

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Yi Fu, Baojun Bian, Jizhou Zhang, Dirk Linowski. THE OPTIMAL EXECUTION STRATEGY OF EMPLOYEE STOCK OPTIONS[J]. Journal of Applied Analysis & Computation, 2018, 8(4): 1122-1142. doi: 10.11948/2018.1122

Citation:

Yi Fu, Baojun Bian, Jizhou Zhang, Dirk Linowski. THE OPTIMAL EXECUTION STRATEGY OF EMPLOYEE STOCK OPTIONS[J]. Journal of Applied Analysis & Computation, 2018, 8(4): 1122-1142. doi: 10.11948/2018.1122

THE OPTIMAL EXECUTION STRATEGY OF EMPLOYEE STOCK OPTIONS

1 School of Finance and Business, Shanghai Normal University, Shanghai 200234, China;
2 Department of Mathematics, Tongji University, Shanghai 200092, China;
3 Institute of International Business Studies, Steinbeis University Berlin, Berlin 10247, Germany

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Abstract

Abstract

In this paper, we develop an optimal execution strategy for employee stock options by means of the fluid model, in which a voluntary turnover is considered. We show that the value function is the viscosity solution of the Hamilton-Jacobi-Bellman variational inequality and prove the uniqueness of the viscosity solution. Finally, we present numerical illustrative examples and numerical solutions of optimal strategies which are computed by the finite difference method.
- Optimal execution strategy /
- ESO /
- HJBVI /
- viscosity solution
MSC: 39A14;93E20

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References

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