Stock repurchase with an adaptive reservation price: A study of the greedy policy

Ye Lu, Asuman Ozdaglar, David Simchi-Levi

    Research output: Journal Publications and ReviewsRGC 21 - Publication in refereed journalpeer-review

    Abstract

    We consider the problem of stock repurchase over a finite time horizon. We assume that a firm has a reservation price for the stock, which is the highest price that the firm is willing to pay to repurchase its own stock. We characterize the optimal policy for the trader to maximize the total number of shares that they can buy over a fixed time horizon. In particular, we study a greedy policy, which involves in each period buying a quantity that drives stock price to the reservation price. © 2010 Elsevier B.V. All rights reserved.
    Original languageEnglish
    Pages (from-to)22-27
    JournalOperations Research Letters
    Volume39
    Issue number1
    DOIs
    Publication statusPublished - Jan 2011

    Research Keywords

    • Dynamic programming
    • Reservation price
    • Stock repurchase

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