Selling price management of a highly liquid asset under given volume constraints

Abstract

Goal: this paper considers the selling strategy of a highly liquid asset traded at market prices. The purpose of this paper is to develop a management that provides an improvement in the weighted average selling price. Methodology: it is assumed that market prices follow a diffusion process in which the drift and volatility coefficients are random functions of time. Under the given assumptions, using the stochastic differential equation theory we build a sales management in which only the prices of exchange transactions act as feedback. Findings: the management constructed in the present research allows the seller to hedge against sharp drops in market prices by artifi cially raising the weighted average selling price due to the implementation of a speculative trading strategy. Originality and contribution of the authors: in contrast to the management proposed earlier, this paper provides a lower limit on the minimum number of assets that must be traded, as well as constraints on the maximum possible number of assets allowed to be traded. Examples of virtual trading on real world exchanges are given, demonstrating the effect of the imposed restrictions on the values of the weighted average selling prices.