Guasoni, Paolo and Rásonyi, Miklós (2015) Hedging, arbitrage and optimality with superlinear frictions. ANNALS OF APPLIED PROBABILITY, 25 (4). pp. 2066-2095. ISSN 1050-5164
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Abstract
In a continuous-time model with multiple assets described by càdlàg processes, this paper characterizes superhedging prices, absence of arbitrage, and utility maximizing strategies, under general frictions that make execution prices arbitrarily unfavorable for high trading intensity. Such frictions induce a duality between feasible trading strategies and shadow execution prices with a martingale measure. Utility maximizing strategies exist even if arbitrage is present, because it is not scalable at will. © Institute of Mathematical Statistics, 2015.
| Item Type: | Article |
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| Uncontrolled Keywords: | utility maximization; Price-impact; hedging; Frictions; arbitrage |
| Subjects: | H Social Sciences / társadalomtudományok > HG Finance / pénzügy Q Science / természettudomány > QA Mathematics / matematika |
| SWORD Depositor: | MTMT SWORD |
| Depositing User: | MTMT SWORD |
| Date Deposited: | 17 Nov 2015 09:04 |
| Last Modified: | 17 Nov 2015 09:04 |
| URI: | http://real.mtak.hu/id/eprint/30235 |
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