Abstract: A hedging strategy without considering transaction cost is uncompleted which would bring risk to the portfolio. Considering the investor has mean-variance utility, the stock and index futures is the arithmetic Brownian movements without drift and market impact is linear, the continuous liquidation trajectory of the single hedged stock is derived under given time span. The parameters analysis shows that the investors are likely to trade quickly if they are more risk aversion or the portfolio's variance is larger; if the correlation coefficient is negative, they want to execute more quickly and vice versa; the liquidation velocity changes opposite to the correlation coefficient under the given hedging ratio.

Key words: stock index futures, hedging, liquidation