Stock repurchase with an adaptive reservation price: A study of the greedy policy |
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| Authors: | Ye Lu Asuman Ozdaglar |
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| Institution: | a Department of Management Sciences, City University of Hong Kong, Hong Kongb Department of Electrical Engineering and Computer Science, Massachusetts Institute of Technology, United Statesc Engineering Systems Division and Department of Civil and Environmental Engineering, Massachusetts Institute of Technology, United States |
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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. |
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| Keywords: | Stock repurchase Dynamic programming Reservation price |
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