Related papers: Almost-sure hedging with permanent price impact

Within a financial model with linear price impact, we study the problem of hedging a covered European option under gamma constraint. Using stochastic target and partial differential equation smoothing techniques, we prove that the…

The approach that allows find European option price on the assumption of hedging at discrete times is proposed. The routine allows find the option price not for lognormal distribution functions of underlying asset only but for wide enough…

We solve the superhedging problem for European options in an illiquid extension of the Black-Scholes model, in which transactions have transient price impact and the costs and the strategies for hedging are affected by physical or cash…

We consider the robust pricing and hedging of American options in a continuous time setting. We assume asset prices are continuous semimartingales, but we allow for general model uncertainty specification via adapted closed convex…

Paper is based on "The cost of illiquidity and its effects on hedging", L. C. G. Rogers and Surbjeet Singh, 2010. We generalize its thesis to constant elasticity model, which own previously used Black-Schoels model as a special case. The…

We consider the problem of hedging a European contingent claim in a Bachelier model with transient price impact as proposed by Almgren and Chriss. Following the approach of Rogers and Singh and Naujokat and Westray, the hedging problem can…

We study the optimal portfolio liquidation problem over a finite horizon in a limit order book with bid-ask spread and temporary market price impact penalizing speedy execution trades. We use a continuous-time modeling framework, but in…

We study the pricing and hedging of European spread options on correlated assets when, in contrast to the standard framework and consistent with imperfect liquidity markets, the trading in the stock market has a direct impact on stocks…

We present a new approach for studying the problem of optimal hedging of a European option in a finite and complete discrete-time market model. We consider partial hedging strategies that maximize the success probability or minimize the…

We provide a model-free pricing-hedging duality in continuous time. For a frictionless market consisting of $d$ risky assets with continuous price trajectories, we show that the purely analytic problem of finding the minimal superhedging…

We consider as given a discrete time financial market with a risky asset and options written on that asset and determine both the sub- and super-hedging prices of an American option in the model independent framework of ArXiv:1305.6008. We…

We investigate the relation between the fair price for European-style vanilla options and the distribution of short-term returns on the underlying asset ignoring transaction and other costs. We compute the risk-neutral probability density…

We develop a theory for option pricing with perfect hedging in an inefficient market model where the underlying price variations are autocorrelated over a time tau. This is accomplished by assuming that the underlying noise in the system is…

In this paper, we combine modern portfolio theory and option pricing theory so that a trader who takes a position in a European option contract and the underlying assets can construct an optimal portfolio such that at the moment of the…

This article considers the pricing and hedging of a call option when liquidity matters, that is, either for a large nominal or for an illiquid underlying asset. In practice, as opposed to the classical assumptions of a price-taking agent in…

The usual theory of asset pricing in finance assumes that the financial strategies, i.e. the quantity of risky assets to invest, are real-valued so that they are not integer-valued in general, see the Black and Scholes model for instance.…

Proof that under simple assumptions, such as constraints of Put-Call Parity, the probability measure for the valuation of a European option has the mean derived from the forward price which can, but does not have to be the risk-neutral one,…

In the theory of riskfree hedges in continuous time finance, one can start with the delta-hedge and derive the option pricing equation, or one can start with the replicating, self-financing hedging strategy and derive both the delta-hedge…

Given a finite set of European call option prices on a single underlying, we want to know when there is a market model which is consistent with these prices. In contrast to previous studies, we allow models where the underlying trades at a…

We study a financial model with a non-trivial price impact effect. In this model we consider the interaction of a large investor trading in an illiquid security, and a market maker who is quoting prices for this security. We assume that the…