IDEAS home Printed from
   My bibliography  Save this article

Option pricing for large agents


  • Mattias Jonsson
  • Jussi Keppo


This paper considers arbitrage-free option pricing in the presence of large agents. These large agents have a significant market power, and their trading strategies influence the dynamics of the financial asset prices. First, a simple asset pricing model in the presence of large agents is presented. Then a nonlinear partial differential equation is found for the prices of European options in the model. The unit option price depends on the large agent's asset holdings. Finally, a game model is introduced for the interaction between different market players. In this game, the outstanding number of options, as well as the option price, is found as a Nash equilibrium.

Suggested Citation

  • Mattias Jonsson & Jussi Keppo, 2002. "Option pricing for large agents," Applied Mathematical Finance, Taylor & Francis Journals, vol. 9(4), pages 261-272.
  • Handle: RePEc:taf:apmtfi:v:9:y:2002:i:4:p:261-272 DOI: 10.1080/1350486022000025471

    Download full text from publisher

    File URL:
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    1. Kreps, David M., 1981. "Arbitrage and equilibrium in economies with infinitely many commodities," Journal of Mathematical Economics, Elsevier, vol. 8(1), pages 15-35, March.
    2. 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..
    3. Jouini, Elyes & Kallal, Hedi, 1993. "General equilibrium with producers and brokers : Existence and regularity," Economics Letters, Elsevier, vol. 41(3), pages 257-263.
    4. RĂ˜diger Frey, 1998. "Perfect option hedging for a large trader," Finance and Stochastics, Springer, vol. 2(2), pages 115-141.
    5. Platen, Eckhard & Martin Schweizer, 1994. "On Smile and Skewness," Discussion Paper Serie B 302, University of Bonn, Germany.
    6. repec:dau:papers:123456789/5640 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Suhas Nayak & George Papanicolaou, 2008. "Market Influence of Portfolio Optimizers," Applied Mathematical Finance, Taylor & Francis Journals, vol. 15(1), pages 21-40.
    2. Erhan Bayraktar & Ulrich Horst & Ronnie Sircar, 2007. "Queueing Theoretic Approaches to Financial Price Fluctuations," Papers math/0703832,

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:apmtfi:v:9:y:2002:i:4:p:261-272. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Chris Longhurst). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.