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2010-02-04Buch DOI: 10.18452/4239
Illiquidity and Derivative Valuation
dc.contributor.authorHorst, Ulrich
dc.contributor.authorNaujokat, Felix
dc.date.accessioned2017-06-16T00:05:23Z
dc.date.available2017-06-16T00:05:23Z
dc.date.created2010-05-27
dc.date.issued2010-02-04
dc.identifier.issn1860-5664
dc.identifier.urihttp://edoc.hu-berlin.de/18452/4891
dc.description.abstractIn illiquid markets, option traders may have an incentive to increase their portfolio value by using their impact on the dynamics of the underlying. We provide a mathematical framework within which to value derivatives under market impact in a multi-player framework by introducing strategic interactions into the model of Almgren and Chriss (2001). Specifically, we consider a financial market model with several strategically interacting players that hold European contingent claims and whose trading decisions have an impact on the price evolution of the underlying. We establish existence and uniqueness of equilibrium results for risk neutral and CARA investors and show that the equilibrium dynamics can be characterized in terms of a coupled system of possibly non-linear PDEs. For the linear cost function used in Almgren and Chriss (2001), we obtain a (semi) closed form solution. Analyzing this solution, we show how market manipulation can be reduced.eng
dc.language.isoeng
dc.publisherHumboldt-Universität zu Berlin, Wirtschaftswissenschaftliche Fakultät
dc.subjectStochastic differential gameseng
dc.subjectilliquidityeng
dc.subjectmarket impacteng
dc.subjectderivative valuationeng
dc.subject.ddc330 Wirtschaft
dc.titleIlliquidity and Derivative Valuation
dc.typebook
dc.identifier.urnurn:nbn:de:kobv:11-100111241
dc.identifier.doihttp://dx.doi.org/10.18452/4239
local.edoc.container-titleSonderforschungsbereich 649: Ökonomisches Risiko
local.edoc.pages32
local.edoc.type-nameBuch
local.edoc.container-typeseries
local.edoc.container-type-nameSchriftenreihe
local.edoc.container-volume2010
local.edoc.container-issue11
local.edoc.container-year2010
local.edoc.container-erstkatid2195055-6

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