Almost-sure hedging with permanent price impact
classification
💱 q-fin.PR
math.PRq-fin.TR
keywords
hedgingimpactpermanentpriceadmitsalmost-sureconsidercontinuous
read the original abstract
We consider a financial model with permanent price impact. Continuous time trading dynamics are derived as the limit of discrete rebalancing policies. We then study the problem of super-hedging a European option. Our main result is the derivation of a quasi-linear pricing equation. It holds in the sense of viscosity solutions. When it admits a smooth solution, it provides a perfect hedging strategy.
This paper has not been read by Pith yet.
discussion (0)
Sign in with ORCID, Apple, or X to comment. Anyone can read and Pith papers without signing in.