We will now take a look at a very common problem in finance known as the optimal liquidation problem or how to sell stocks with minimal loss. So, what is the optimal liquidation problem? Let’s assume that you have a certain number of stocks that you want to sell within a given timeframe. For example, let’s assume you had a million shares that you want to sell within 30 days. Taking into account the costs arising from market impact and a trader’s risk aversion, the goal is to create a trading list that sells all the stocks, within the given timeframe, such that the total cost of trading is minimized. So, this problem talks about market impact and a trader’s risk aversion, and so on. For those of you who are unfamiliar with the financial markets may not know what these terms mean. So, for the rest of this lesson, I’m going to give a very simple example that explains what these terms mean, and what this problem entails.