Related papers: Price Impact on Term Structure

We analyze a proprietary dataset of trades by a single asset manager, comparing their price impact with that of the trades of the rest of the market. In the context of a linear propagator model we find no significant difference between the…

In a model with no given probability measure, we consider asset pricing in the presence of frictions and other imperfections and characterize the property of coherent pricing, a notion related to (but much weaker than) the no arbitrage…

This paper studies arbitrage pricing theory in financial markets with implicit transaction costs. We extend the existing theory to include the more realistic possibility that the price at which the investors trade is dependent on the traded…

The additive process generalizes the L\'evy process by relaxing its assumption of time-homogeneous increments and hence covers a larger family of stochastic processes. Recent research in option pricing shows that modeling the underlying log…

Trading a financial instrument pushes its price and those of other assets, a phenomenon known as cross-impact. To be of use, cross-impact models must fit data and be well-behaved so they can be applied in applications such as optimal…

We give a complete solution to the problem of minimizing the expected liquidity costs in presence of a general drift when the underlying market impact model has linear transient price impact with exponential resilience. It turns out that…

In this paper, we extend the classical Ho-Lee binomial term structure model to the case of time-dependent parameters and, as a result, resolve a drawback associated with the model. This is achieved with the introduction of a more flexible…

We consider a discrete-time model of a financial market where a risky asset is bought and sold with transactions having a transient price impact. It is shown that the corresponding utility maximization problem admits a solution. We manage…

In this work, we consider the issue of pricing exchange options and spread options with stochastic interest rates. We provide the closed form solution for the exchange option price when interest rate is stochastic. Our result holds when…

Fixed income markets share many features with the equity markets. However there are significant differences as well and many attempts have been done in the past to develop specific tools which describe (and possibly forecasts) the behavior…

The notion of market impact is subtle and sometimes misinterpreted. Here we argue that impact should not be misconstrued as volatility. In particular, the so-called ``square-root impact law'', which states that impact grows as the…

We study the price impact of storage facilities in electricity markets and analyze the long-term profitability of these facilities in prospective scenarios of energy transition. To this end, we begin by characterizing the optimal operating…

In this letter, I consider the issue of pricing risky debt by following Merton's approach. I generalize Merton's results to the case where the interest rate is modeled by the CIR term structure. Exact closed forms are provided for the risky…

In this paper, we construct the utility-based optimal hedging strategy for a European-type option in the Almgren-Chriss model with temporary price impact. The main mathematical challenge of this work stems from the degeneracy of the second…

Over the last decade, dividends have become a standalone asset class instead of a mere side product of an equity investment. We introduce a framework based on polynomial jump-diffusions to jointly price the term structures of dividends and…

We consider a general local-stochastic volatility model and an investor with exponential utility. For a European-style contingent claim, whose payoff may depend on either a traded or non-traded asset, we derive an explicit approximation for…

The available liquidity at any time in financial markets falls largely short of the typical size of the orders that institutional investors would trade. In order to reduce the impact on prices due to the execution of large orders, traders…

In this article we revisit the classic problem of tatonnement in price formation from a microstructure point of view, reviewing a recent body of theoretical and empirical work explaining how fluctuations in supply and demand are slowly…

The paper studies sub and super-replication price bounds for contingent claims defined on general trajectory based market models. No prior probabilistic or topological assumptions are placed on the trajectory space, trading is assumed to…

We study the problem of what causes prices to change. We define the mechanical impact of a trading order as the change in future prices in the absence of any future changes in decision making, and its it informational impact as the…