Optimal Liquidation with Support and Resistance Levels under Multi-Skew Brownian Motion
Jun Maeda
Abstract
We solve the perpetual liquidation problem for a geometric multi-skew Brownian motion carrying local-time pushes upward at a support level and downward at a resistance level, a model of technical analysis that is Markov in the price alone. Three geometries arise, separated by a closed-form criterion: the continuation band lies below resistance, straddles it, or pins its upper edge there. Selling into resistance is a conclusion rather than an assumption. Identification is asymmetric: exercise behaviour determines the support parameters exactly, while the strength of resistance is recoverable only on an interval with a closed-form endpoint.
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