# Question

A trader wishes to unwind a position of 200,000 units in an asset over eight days. The dollar bid–offer spread, as a function of daily trading volume q, is a + b cq where a = 0.2, b = 0.15 and c = 0.1 and q is measured in thousands. The standard deviation of the price change per day is $1.50. What is the optimal trading strategy for minimizing the 99% confidence level for the

costs? What is the average time the trader waits before selling? How does this average time change as the confidence level changes?

costs? What is the average time the trader waits before selling? How does this average time change as the confidence level changes?

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