Large investor trading impacts on volatility
Lasry, Jean-Michel; Lions, Pierre-Louis (2007), Large investor trading impacts on volatility, Annales de l'Institut Henri Poincaré. Analyse non linéaire, 24, 2, p. 311-323. http://dx.doi.org/10.1016/j.anihpc.2005.12.006
TypeArticle accepté pour publication ou publié
Journal nameAnnales de l'Institut Henri Poincaré. Analyse non linéaire
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Abstract (EN)We begin with this paper a series devoted to a tentative model for the influence of hedging on the dynamics of an asset. We study here the case of a “large” investor and solve two problems in the context of such a model namely the question of the fair value (or liquidative value) of a “large” position and the question of pricing or hedging an option. In order to do so, we use a utility maximization approach and some new results in stochastic control theory.
Subjects / Keywordsutility maximization approach; stochastic control theory; hedging; dynamics of an asset
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