Large investor trading impacts on volatility

Lasry, Jean-Michel; Lions, Pierre-Louis

Lasry, Jean-Michel; Lions, Pierre-Louis (2007), Large investor trading impacts on volatility, in Taflin, Erik; Pham, Huyen; Lions, Pierre-Louis; Lasry, Jean-Michel; Kohatsu-Higa, Arturo; Ekeland, Ivar; Carmona, René, Paris-Princeton Lectures on Mathematical Finance 2004, Springer : Berlin, p. 173-190. http://dx.doi.org/10.1007/978-3-540-73327-0_4

Type

Communication / Conférence

Date

2007

Book title

Paris-Princeton Lectures on Mathematical Finance 2004

Book author

Taflin, Erik; Pham, Huyen; Lions, Pierre-Louis; Lasry, Jean-Michel; Kohatsu-Higa, Arturo; Ekeland, Ivar; Carmona, René

Publisher

Springer

Series title

Lecture Notes in Mathematics

Series number

1919

Published in

Berlin

ISBN

978-3-540-73326-3

Pages

173-190

Abstract (EN)

This is the first paper in 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: the question of the fair value (or liquidation 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 / Keywords

Liquidation value; Utility pricing; Large investor impact; Stochastic control

JEL

D46 - Value Theory
C44 - Operations Research; Statistical Decision Theory