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Option hedging for small investors under liquidity costs

Author Info

Listed author(s):
  • Umut Çetin

    ()

  • H. Soner

    ()

  • Nizar Touzi

    ()

Registered author(s):

    Abstract

    No abstract is available for this item.

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    File URL: http://hdl.handle.net/10.1007/s00780-009-0116-x
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    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
    DOI: 10.1007/s00780-009-0116-x
    Contact details of provider: Web page: http://www.springer.com

    Order Information: Web: http://www.springer.com/mathematics/quantitative+finance/journal/780/PS2

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

    Find related papers by 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

    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.
    2. Longstaff, Francis A, 2001. "Optimal Portfolio Choice and the Valuation of Illiquid Securities," Review of Financial Studies, Society for Financial Studies, vol. 14(2), pages 407-431.
    3. 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..
    4. Jaksa Cvitanić & Ioannis Karatzas, 1996. "HEDGING AND PORTFOLIO OPTIMIZATION UNDER TRANSACTION COSTS: A MARTINGALE APPROACH-super-2," Mathematical Finance, Wiley Blackwell, vol. 6(2), pages 133-165.
    5. RØdiger Frey, 1998. "Perfect option hedging for a large trader," Finance and Stochastics, Springer, vol. 2(2), pages 115-141.
    6. 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.
    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..
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    Cited by:

    1. David German & Henry Schellhorn, 2012. "A No-Arbitrage Model of Liquidity in Financial Markets involving Brownian Sheets," Papers 1206.4804, arXiv.org.
    2. B Bouchard & G Loeper & Y Zou, 2015. "Hedging of covered options with linear market impact and gamma constraint," Working Papers hal-01247523, HAL.
    3. Bruno Bouchard & Grégoire Loeper & Yiyi Zou, 2016. "Almost-sure hedging with permanent price impact," Finance and Stochastics, Springer, vol. 20(3), pages 741-771, July.
    4. B Bouchard & G Loeper & Y Zou, 2016. "Almost-sure hedging with permanent price impact," Post-Print hal-01133223, HAL.
    5. Frédéric Abergel & Grégoire Loeper, 2013. "Pricing and hedging contingent claims with liquidity costs and market impact," Working Papers hal-00802402, HAL.
    6. Henry Schellhorn & Ran Zhao, 2016. "A String Model of Liquidity in Financial Markets," Papers 1608.05900, arXiv.org.
    7. Yan Dolinsky & Halil Soner, 2013. "Duality and convergence for binomial markets with friction," Finance and Stochastics, Springer, vol. 17(3), pages 447-475, July.
    8. Alexandre Roch, 2011. "Liquidity risk, price impacts and the replication problem," Finance and Stochastics, Springer, vol. 15(3), pages 399-419, September.
    9. B Bouchard & G Loeper & Y Zou, 2015. "Almost-sure hedging with permanent price impact," Working Papers hal-01133223, HAL.
    10. Peter Bank & Selim Gökay, 2016. "Superreplication when trading at market indifference prices," Finance and Stochastics, Springer, vol. 20(1), pages 153-182, January.
    11. B. Bouchard & G. Loeper & Y. Zou, 2015. "Almost-sure hedging with permanent price impact," Papers 1503.05475, arXiv.org.
    12. Olivier Gu\'eant & Jiang Pu, 2013. "Option pricing and hedging with execution costs and market impact," Papers 1311.4342, arXiv.org, revised Apr 2015.
    13. B Bouchard & G Loeper & Y Zou, 2015. "Hedging of covered options with linear market impact and gamma constraint," Papers 1512.07087, arXiv.org.
    14. Peter Bank & Selim G\"okay, 2013. "Superreplication when trading at market indifference prices," Papers 1310.3113, arXiv.org.
    15. Peter Bank & Selim Gökay, 2016. "Superreplication when trading at market indifference prices," Finance and Stochastics, Springer, vol. 20(1), pages 153-182, January.
    16. Salvatore Federico & Paul Gassiat, 2012. "Viscosity characterization of the value function of an investment-consumption problem in presence of illiquid assets," Papers 1211.1286, arXiv.org.
    17. Paolo Guasoni & Mikl\'os R\'asonyi, 2015. "Hedging, arbitrage and optimality with superlinear frictions," Papers 1506.05895, arXiv.org.
    18. Rossella Agliardi & Ramazan Gençay, 2012. "Hedging through a Limit Order Book with Varying Liquidity," Working Paper Series 12_12, The Rimini Centre for Economic Analysis.
    19. Panagiotis Christodoulou & Nils Detering & Thilo Meyer-Brandis, 2017. "Quadratic hedging with multiple assets under illiquidity with applications in energy markets," Papers 1705.06918, arXiv.org.
    20. repec:spr:compst:v:71:y:2010:i:3:p:551-585 is not listed on IDEAS
    21. H. Mete Soner & Mirjana Vukelja, 2016. "Utility maximization in an illiquid market in continuous time," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 84(2), pages 285-321, October.
    22. Feyzullah Egriboyun & H. Soner, 2010. "Optimal investment strategies with a reallocation constraint," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 71(3), pages 551-585, June.

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