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Liquidity risk, price impacts and the replication problem

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  • Alexandre Roch

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Abstract

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Suggested Citation

  • Alexandre Roch, 2011. "Liquidity risk, price impacts and the replication problem," Finance and Stochastics, Springer, vol. 15(3), pages 399-419, September.
  • Handle: RePEc:spr:finsto:v:15:y:2011:i:3:p:399-419
    DOI: 10.1007/s00780-011-0156-x
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    References listed on IDEAS

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    1. Vathana Ly Vath & Mohamed Mnif & Huyên Pham, 2007. "A model of optimal portfolio selection under liquidity risk and price impact," Finance and Stochastics, Springer, vol. 11(1), pages 51-90, January.
    2. P. Weber & B. Rosenow, 2005. "Order book approach to price impact," Quantitative Finance, Taylor & Francis Journals, vol. 5(4), pages 357-364.
    3. J. Doyne Farmer & Laszlo Gillemot & Fabrizio Lillo & Szabolcs Mike & Anindya Sen, 2004. "What really causes large price changes?," Quantitative Finance, Taylor & Francis Journals, vol. 4(4), pages 383-397.
    4. Philipp Weber & Bernd Rosenow, 2006. "Large stock price changes: volume or liquidity?," Quantitative Finance, Taylor & Francis Journals, vol. 6(1), pages 7-14.
    5. 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..
    6. 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..
    7. Aur'elien Alfonsi & Antje Fruth & Alexander Schied, 2007. "Optimal execution strategies in limit order books with general shape functions," Papers 0708.1756, arXiv.org, revised Feb 2010.
    8. 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.
    9. Aurelien Alfonsi & Antje Fruth & Alexander Schied, 2010. "Optimal execution strategies in limit order books with general shape functions," Quantitative Finance, Taylor & Francis Journals, vol. 10(2), pages 143-157.
    10. Soner, H. Mete & Cetin, Umut & Touzi, Nizar, 2010. "Option hedging for small investors under liquidity costs," LSE Research Online Documents on Economics 28992, London School of Economics and Political Science, LSE Library.
    11. RØdiger Frey, 1998. "Perfect option hedging for a large trader," Finance and Stochastics, Springer, vol. 2(2), pages 115-141.
    12. Umut Çetin & L. C. G. Rogers, 2007. "Modeling Liquidity Effects In Discrete Time," Mathematical Finance, Wiley Blackwell, vol. 17(1), pages 15-29.
    13. Hull, John C & White, Alan D, 1987. " The Pricing of Options on Assets with Stochastic Volatilities," Journal of Finance, American Finance Association, vol. 42(2), pages 281-300, June.
    14. Darrell Duffie & Rui Kan, 1996. "A Yield-Factor Model Of Interest Rates," Mathematical Finance, Wiley Blackwell, vol. 6(4), pages 379-406.
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    Citations

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    Cited by:

    1. Ladislav Kristoufek, 2013. "Fractal Markets Hypothesis and the Global Financial Crisis: Wavelet Power Evidence," Papers 1310.1446, arXiv.org.
    2. Li, Da-Ye & Nishimura, Yusaku & Men, Ming, 2014. "Fractal markets: Liquidity and investors on different time horizons," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 407(C), pages 144-151.
    3. Masaaki Fujii, 2015. "Optimal Position Management for a Market Maker with Stochastic Price Impacts," CARF F-Series CARF-F-360, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo, revised Sep 2015.
    4. Masaaki Fujii, 2015. "Optimal Position Management for a Market Maker with Stochastic Price Impacts," CIRJE F-Series CIRJE-F-963, CIRJE, Faculty of Economics, University of Tokyo.
    5. Dirk Becherer & Todor Bilarev & Peter Frentrup, 2017. "Stability for gains from large investors' strategies in M1/J1 topologies," Papers 1701.02167, arXiv.org, revised Mar 2018.
    6. Sergey Lototsky & Henry Schellhorn & Ran Zhao, 2016. "A String Model of Liquidity in Financial Markets," Papers 1608.05900, arXiv.org, revised Apr 2018.
    7. repec:wsi:ijfexx:v:04:y:2017:i:02n03:n:s242478631750030x is not listed on IDEAS
    8. Etienne Chevalier & Vathana Ly Vath & Simone Scotti & Alexandre Roch, 2016. "Optimal Execution Cost For Liquidation Through A Limit Order Market," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 19(01), pages 1-26, February.
    9. 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.

    More about this item

    Keywords

    Liquidity risk; BSDEs; Stochastic volatility; Price impacts; 60H30; 60G35; 91B24; 91B30; D40; G13;

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

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