Instantaneous self-fulfilling of long-term prophecies on the probabilistic distribution of financial asset values
Lasry, Jean-Michel; Lions, Pierre-Louis (2007), Instantaneous self-fulfilling of long-term prophecies on the probabilistic distribution of financial asset values, Annales de l'Institut Henri Poincaré (C) Analyse non linéaire, 24, 3, p. 361-368. http://dx.doi.org/10.1016/j.anihpc.2005.12.005
Type
Article accepté pour publication ou publiéDate
2007Journal name
Annales de l'Institut Henri Poincaré (C) Analyse non linéaireVolume
24Number
3Publisher
Elsevier
Pages
361-368
Publication identifier
Metadata
Show full item recordAbstract (EN)
Our goal here is to present various examples of situations where a “large” investor (i.e. an investor whose “size” challenges the liquidity or the depth of the market) sees his long-term guesses on some important financial parameters instantaneously confirmed by the market dynamics as a consequence of his trading strategy, itself based upon his guesses. These examples are worked out in the context of a model (i.e. a quantitative framework) which attempts to provide a rigorous basis for the qualitative intuitions of many practitioners. Our results may be viewed as some kind of reverse Black–Scholes paradigm where modifications of option prices affect today's real volatility.Subjects / Keywords
trading strategy; market dynamics; guesses; Black–Scholes paradigm; option pricesRelated items
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