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Option hedging for small investors under liquidity costs

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  • Umut Çetin

    ()

  • H. Soner

    ()

  • Nizar Touzi

    ()

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    Abstract

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    File URL: http://hdl.handle.net/10.1007/s00780-009-0116-x
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    Bibliographic Info

    Article provided by Springer in its journal Finance and Stochastics.

    Volume (Year): 14 (2010)
    Issue (Month): 3 (September)
    Pages: 317-341

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    Handle: RePEc:spr:finsto:v:14:y:2010:i:3:p:317-341

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    Web page: http://www.springerlink.com/content/101164/

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    Related research

    Keywords: Super-replication; Liquidity cost; Gamma process; Parabolic majorant; PDE valuation; 91B28; 35K55; 60H30; C61; G13; D52;

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    References

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. RØdiger Frey, 1998. "Perfect option hedging for a large trader," Finance and Stochastics, Springer, Springer, vol. 2(2), pages 115-141.
    2. Jaksa Cvitanić & Ioannis Karatzas, 1996. "HEDGING AND PORTFOLIO OPTIMIZATION UNDER TRANSACTION COSTS: A MARTINGALE APPROACH-super-2," Mathematical Finance, Wiley Blackwell, Wiley Blackwell, vol. 6(2), pages 133-165.
    3. Eckhard Platen & Martin Schweizer, 1998. "On Feedback Effects from Hedging Derivatives," Mathematical Finance, Wiley Blackwell, Wiley Blackwell, vol. 8(1), pages 67-84.
    4. Longstaff, Francis A, 2001. "Optimal Portfolio Choice and the Valuation of Illiquid Securities," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 14(2), pages 407-31.
    5. Umut Çetin & Robert Jarrow & Philip Protter, 2004. "Liquidity risk and arbitrage pricing theory," Finance and Stochastics, Springer, Springer, vol. 8(3), pages 311-341, 08.
    6. Jarrow, Robert A., 1994. "Derivative Security Markets, Market Manipulation, and Option Pricing Theory," Journal of Financial and Quantitative Analysis, Cambridge University Press, Cambridge University Press, vol. 29(02), pages 241-261, June.
    7. Halil Mete Soner & Guy Barles, 1998. "Option pricing with transaction costs and a nonlinear Black-Scholes equation," Finance and Stochastics, Springer, Springer, vol. 2(4), pages 369-397.
    8. U. �etin & R. Jarrow & P. Protter & M. Warachka, 2006. "Pricing Options in an Extended Black Scholes Economy with Illiquidity: Theory and Empirical Evidence," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 19(2), pages 493-529.
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    Cited by:
    1. Alexandre Roch, 2011. "Liquidity risk, price impacts and the replication problem," Finance and Stochastics, Springer, Springer, vol. 15(3), pages 399-419, September.
    2. Rossella Agliardi & Ramazan Gençay, 2012. "Hedging through a Limit Order Book with Varying Liquidity," Working Paper Series, The Rimini Centre for Economic Analysis 12_12, The Rimini Centre for Economic Analysis.
    3. David German & Henry Schellhorn, 2012. "A No-Arbitrage Model of Liquidity in Financial Markets involving Brownian Sheets," Papers 1206.4804, arXiv.org.
    4. Peter Bank & Selim G\"okay, 2013. "Superreplication when trading at market indifference prices," Papers 1310.3113, arXiv.org.
    5. Frédéric Abergel & Grégoire Loeper, 2013. "Pricing and hedging contingent claims with liquidity costs and market impact," Working Papers hal-00802402, HAL.
    6. Feyzullah Egriboyun & H. Soner, 2010. "Optimal investment strategies with a reallocation constraint," Computational Statistics, Springer, Springer, vol. 71(3), pages 551-585, June.
    7. Yan Dolinsky & Halil Soner, 2013. "Duality and convergence for binomial markets with friction," Finance and Stochastics, Springer, Springer, vol. 17(3), pages 447-475, July.
    8. Olivier Gu\'eant & Jiang Pu, 2013. "Option pricing and hedging with execution costs and market impact," Papers 1311.4342, arXiv.org, revised Aug 2014.

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