Loading...
Please wait, while we are loading the content...
Similar Documents
Pricing and hedging contingent claims with liquidity costs and market impact
| Content Provider | Hyper Articles en Ligne (HAL) |
|---|---|
| Author | Abergel, Frédéric Loeper, Grégoire |
| Abstract | We study the influence of taking liquidity costs and market impact into account when hedging a contingent claim, first in the discrete time setting, then in continuous time. In the latter case and in a complete market, we derive a fully non-linear pricing partial differential equation, and characterizes its parabolic nature according to the value of a numerical parameter naturally interpreted as a relaxation coefficient for market impact. We then investigate the more challenging case of stochastic volatility models, and prove the parabolicity of the pricing equation in a particular case. |
| File Format | |
| Language | English |
| Access Restriction | Open |
| Subject Keyword | Market impact partial differential equations liquidity costs qfin math Quantitative Finance [q-fin] Computational Finance [q-fin.CP] Mathematics [math] Analysis of PDEs [math.AP] |
| Content Type | Text |
| Resource Type | Article |
