THE OPTIMAL EXECUTION STRATEGY OF EMPLOYEE STOCK OPTIONS | Zendy

Yi Fu | Zendy; Baojun Bian | Zendy; Jizhou Zhang | Zendy; Dirk Linowski | Zendy

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THE OPTIMAL EXECUTION STRATEGY OF EMPLOYEE STOCK OPTIONS

Author(s) -

Yi Fu,

Baojun Bian,

Jizhou Zhang,

Dirk Linowski

Publication year - 2018

Publication title -

journal of applied analysis and computation

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 0.55

H-Index - 21

eISSN - 2158-5644

pISSN - 2156-907X

DOI - 10.11948/2018.1122

Subject(s) - viscosity solution , uniqueness , variational inequality , bellman equation , mathematics , hamilton–jacobi–bellman equation , mathematical optimization , penalty method , viscosity , computer science , mathematical analysis , physics , quantum mechanics

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.

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