2009/10/17 by David German, German, David
Economics, Econometrics and Finance · #Complex Systems and Time Series Analysis #FOS: Economics and business #Financial Markets and Investment Strategies #Pricing of Securities (q-fin.PR) #Stochastic processes and financial applications #Trading and Market Microstructure (q-fin.TR) #q-fin.PR #q-fin.TR
paper · pdf · doi:10.48550/arxiv.0910.3258
arxiv created 2009/10/17 · openalex publication_date 2009/10/17 · arxiv updated 2009/12/01 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28
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 market maker quotes the prices such that by taking the other side of the investor's demand, the market maker will arrive at maturity with maximal expected wealth. Within this model we concentrate on the issue of contingent claims' hedging.