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

Author(s)
Lu, Ye; Simchi-Levi, David; Ozdaglar, Asuman E.
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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.
Date issued
2010-11
URI
http://hdl.handle.net/1721.1/101735
Department
Massachusetts Institute of Technology. Department of Civil and Environmental Engineering; Massachusetts Institute of Technology. Department of Electrical Engineering and Computer Science; Massachusetts Institute of Technology. Engineering Systems Division
Journal
Operations Research Letters
Publisher
Elsevier
Citation
Lu, Ye, Asuman Ozdaglar, and David Simchi-Levi. “Stock Repurchase with an Adaptive Reservation Price: A Study of the Greedy Policy.” Operations Research Letters 39, no. 1 (January 2011): 22–27.
Version: Author's final manuscript
ISSN
01676377
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