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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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  • Umut Çetin & H. Soner & Nizar Touzi, 2010. "Option hedging for small investors under liquidity costs," Finance and Stochastics, Springer, vol. 14(3), pages 317-341, September.
    • Handle: RePEc:spr:finsto:v:14:y:2010:i:3:p:317-341
    DOI: 10.1007/s00780-009-0116-x
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    References listed on IDEAS

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    1. Eckhard Platen & Martin Schweizer, 1998. "On Feedback Effects from Hedging Derivatives," Mathematical Finance, Wiley Blackwell, vol. 8(1), pages 67-84, January.
    2. Longstaff, Francis A, 2001. "Optimal Portfolio Choice and the Valuation of Illiquid Securities," The Review of Financial Studies, Society for Financial Studies, vol. 14(2), pages 407-431.
    3. Jakša Cvitanić & Ioannis Karatzas, 1996. "Hedging And Portfolio Optimization Under Transaction Costs: A Martingale Approach12," Mathematical Finance, Wiley Blackwell, vol. 6(2), pages 133-165, April.
    4. U. Çetin & R. Jarrow & P. Protter & M. Warachka, 2008. "Pricing Options in an Extended Black Scholes Economy with Illiquidity: Theory and Empirical Evidence," World Scientific Book Chapters, in: Financial Derivatives Pricing Selected Works of Robert Jarrow, chapter 9, pages 185-221, World Scientific Publishing Co. Pte. Ltd..
    5. ,, 2002. "Problems And Solutions," Econometric Theory, Cambridge University Press, vol. 18(1), pages 193-194, February.
    6. Broadie, Mark & Cvitanic, Jaksa & Soner, H Mete, 1998. "Optimal Replication of Contingent Claims under Portfolio Constraints," The Review of Financial Studies, Society for Financial Studies, vol. 11(1), pages 59-79.
    7. Umut Çetin & Robert A. Jarrow & Philip Protter, 2008. "Liquidity risk and arbitrage pricing theory," World Scientific Book Chapters, in: Financial Derivatives Pricing Selected Works of Robert Jarrow, chapter 8, pages 153-183, World Scientific Publishing Co. Pte. Ltd..
    8. Robert A. Jarrow, 2008. "Derivative Security Markets, Market Manipulation, and Option Pricing Theory," World Scientific Book Chapters, in: Financial Derivatives Pricing Selected Works of Robert Jarrow, chapter 7, pages 131-151, World Scientific Publishing Co. Pte. Ltd..
    9. ,, 2002. "Problems And Solutions," Econometric Theory, Cambridge University Press, vol. 18(2), pages 541-545, April.
    10. Peter Bank & Dietmar Baum, 2004. "Hedging and Portfolio Optimization in Financial Markets with a Large Trader," Mathematical Finance, Wiley Blackwell, vol. 14(1), pages 1-18, January.
    11. ,, 2002. "Problems And Solutions," Econometric Theory, Cambridge University Press, vol. 18(4), pages 1007-1017, August.
    12. RØdiger Frey, 1998. "Perfect option hedging for a large trader," Finance and Stochastics, Springer, vol. 2(2), pages 115-141.
    13. Halil Mete Soner & Guy Barles, 1998. "Option pricing with transaction costs and a nonlinear Black-Scholes equation," Finance and Stochastics, Springer, vol. 2(4), pages 369-397.
    14. ,, 2002. "Problems And Solutions," Econometric Theory, Cambridge University Press, vol. 18(6), pages 1461-1465, December.
    15. ,, 2002. "Problems And Solutions," Econometric Theory, Cambridge University Press, vol. 18(5), pages 1273-1289, October.
    16. ,, 2002. "Problems And Solutions," Econometric Theory, Cambridge University Press, vol. 18(3), pages 819-821, June.
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    More about this item

    Keywords

    Super-replication; Liquidity cost; Gamma process; Parabolic majorant; PDE valuation; 91B28; 35K55; 60H30; C61; G13; D52;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets

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