Optimal intertemporal liquidation of institutional investors with cash requirements and viable loans.

This study examines the optimal intertemporal liquidation strategies to meet the cash requirements of large institutional investors in the presence of permanent and temporary price impacts. We construct a two-period optimal liquidation problem tailored to investors with intertemporal cash requirements, such as pension funds that need to meet periodic payment obligations. We impose viable government loans that can be deployed by state-owned investors, thereby extending the existing literature, which has focused largely on the private sector. The optimal liquidation strategies from a broader perspective can be sorted into three types: preemptive, conventional, and deferred liquidation. The use of viable large-scale loans can be attractive as a buffer in intertemporal decisions. Proper consideration of the timing and amount for liquidation of institutional investors is necessary. This study has important implications for policy makers and can inform the design of strategies for managing the liquidity needs of large institutional investors. [ABSTRACT FROM AUTHOR]