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Pricing and hedging contingent claims with liquidity costs and market impact
| Content Provider | Semantic Scholar |
|---|---|
| Author | Abergel, Frédéric Loeper, Grégoire |
| Copyright Year | 2013 |
| 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 | PDF HTM / HTML |
| DOI | 10.2139/ssrn.2239498 |
| Alternate Webpage(s) | http://hal.inria.fr/docs/00/81/29/54/PDF/LiquidityMarketImpact_Final.pdf |
| Alternate Webpage(s) | https://hal.archives-ouvertes.fr/hal-00802402/document |
| Alternate Webpage(s) | http://fiquant.mas.ecp.fr/wp-content/uploads/2013/12/LiquidityMarketImpact_AbergelLoeper.pdf |
| Alternate Webpage(s) | https://hal.archives-ouvertes.fr/hal-00802402/file/LiquidityMarketImpact_Revised.pdf |
| Alternate Webpage(s) | http://hal.inria.fr/docs/00/85/96/72/PDF/LiquidityMarketImpact_Revised.pdf |
| Alternate Webpage(s) | https://doi.org/10.2139/ssrn.2239498 |
| Language | English |
| Access Restriction | Open |
| Content Type | Text |
| Resource Type | Article |
