Almost-sure hedging with permanent price impact
Bouchard, Bruno; Loeper, Grégoire; Zou, Yiyi (2016), Almost-sure hedging with permanent price impact, Finance and Stochastics, 20, 3, p. 741-771. 10.1007/s00780-016-0295-1
Type
Article accepté pour publication ou publiéExternal document link
https://arxiv.org/abs/1503.05475v1Date
2016Journal name
Finance and StochasticsVolume
20Number
3Publisher
Springer
Pages
741-771
Publication identifier
Metadata
Show full item recordAbstract (EN)
We consider a financial model with permanent price impact. Continuous-time trading dynamics are derived as the limit of discrete rebalancing policies. We then study the problem of superhedging a European option. Our main result is the derivation of a quasilinear pricing equation. It holds in the sense of viscosity solutions. When it admits a smooth solution, it provides a perfect hedging strategy.Subjects / Keywords
Hedging; price impactRelated items
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