Liquidity risk and arbitrage pricing theory

DOI10.1007/s00780-004-0123-xzbMath1064.60083OpenAlexW4230747638MaRDI QIDQ1776006

Robert A. Jarrow, Umut Çetin, Philip E. Protter

Publication date: 20 May 2005

Published in: Finance and Stochastics (Search for Journal in Brave)

Full work available at URL: https://doi.org/10.1007/s00780-004-0123-x

zbMATH Keywords

approximation stochastic integral illiquid markets fundamental theorems of asset pricing approximately complete markets

Mathematics Subject Classification ID

Martingales with continuous parameter (60G44) Derivative securities (option pricing, hedging, etc.) (91G20) Stochastic integrals (60H05)

Related Items (only showing first 100 items - show all)

Merton problem in an infinite horizon and a discrete time with frictions ⋮ Option pricing with linear market impact and nonlinear Black-Scholes equations ⋮ Asset price bubbles, market liquidity, and systemic risk ⋮ MODELING LIQUIDITY EFFECTS IN DISCRETE TIME ⋮ Pricing perpetual put options by the Black-Scholes equation with a nonlinear volatility function ⋮ Group Analysis of the Guéant and Pu Model of Option Pricing and Hedging ⋮ Super-replication with nonlinear transaction costs and volatility uncertainty ⋮ Portfolio insurance with liquidity risk ⋮ Almost-sure hedging with permanent price impact ⋮ Option Replication in Discrete Time with Illiquidity ⋮ Capital asset market equilibrium with liquidity risk, portfolio constraints, and asset price bubbles ⋮ Optimal liquidation in a finite time regime switching model with permanent and temporary pricing impact ⋮ On the strategic behavior of large investors: a mean-variance portfolio approach ⋮ Analytical valuation for geometric Asian options in illiquid markets ⋮ HEDGING OF AMERICAN OPTIONS IN ILLIQUID MARKETS WITH PRICE IMPACTS ⋮ No arbitrage conditions and liquidity ⋮ Asset market equilibrium with liquidity risk ⋮ Bayesian statistical inference for European options with stock liquidity ⋮ Utility maximization in an illiquid market in continuous time ⋮ A Feedback Model for the Financialization of Commodity Markets ⋮ Fundamental Theorems of Asset Pricing for Good Deal Bounds ⋮ Duality and convergence for binomial markets with friction ⋮ OPTIMAL LIQUIDATION IN A LIMIT ORDER BOOK FOR A RISK-AVERSE INVESTOR ⋮ Illiquid financial market models and absence of arbitrage ⋮ Life insurance surrender and liquidity risks ⋮ Optimal portfolio selection under concave price impact ⋮ Understanding the dual formulation for the hedging of path-dependent options with price impact ⋮ LOCAL RISK-MINIMIZATION WITH MULTIPLE ASSETS UNDER ILLIQUIDITY WITH APPLICATIONS IN ENERGY MARKETS ⋮ Arbitrage theory for non convex financial market models ⋮ Scaling limits for super-replication with transient price impact ⋮ Option prices under liquidity risk as weak solutions of semilinear diffusion equations ⋮ Optimal Execution and Price Manipulations in Time-varying Limit Order Books ⋮ Option pricing for a large trader with price impact and liquidity costs ⋮ Hedging of Covered Options with Linear Market Impact and Gamma Constraint ⋮ Pricing in an equilibrium based model for a large investor ⋮ Curve following in illiquid markets ⋮ Liquidity-adjusted risk measures ⋮ Dual representation of superhedging costs in illiquid markets ⋮ Unnamed Item ⋮ Financial markets with a large trader ⋮ Duality Formulas for Robust Pricing and Hedging in Discrete Time ⋮ Symmetry reduction and exact solutions of the non-linear Black-Scholes equation ⋮ Risk measuring under liquidity risk ⋮ Asset liquidity and the valuation of derivative securities ⋮ Perfect hedging under endogenous permanent market impacts ⋮ Option hedging for small investors under liquidity costs ⋮ Asset allocation and liquidity breakdowns: what if your broker does not answer the phone? ⋮ Merton's portfolio problem including market frictions: a closed-form formula supporting the shadow price approach ⋮ Symmetries and exact solutions of a nonlinear pricing options equation ⋮ Signing trades and an evaluation of the Lee-Ready algorithm ⋮ Efficient discretization of stochastic integrals ⋮ Probabilistic approach to solution of nonlinear PDEs arising in financial mathematics ⋮ Large traders and illiquid options: hedging vs. manipulation ⋮ Exact solutions and numerical simulation for Bakstein-Howison model ⋮ Arbitrage and deflators in illiquid markets ⋮ Liquidity risk, price impacts and the replication problem ⋮ A model of optimal portfolio selection under liquidity risk and price impact ⋮ Stability for gains from large investors' strategies in \(M_{1}/J_{1}\) topologies ⋮ Problems of Mathematical Finance by Stochastic Control Methods ⋮ OPTIMAL LIQUIDATION OF DERIVATIVE PORTFOLIOS ⋮ SUPERHEDGING IN ILLIQUID MARKETS ⋮ LIQUIDITY IN A BINOMIAL MARKET ⋮ An infinite-dimensional model of liquidity in financial markets ⋮ Hedging costs for two large investors ⋮ Viscosity characterization of the value function of an investment-consumption problem in presence of an illiquid asset ⋮ Modeling discrete stock price changes using a mixture of Poisson distributions ⋮ Nonhypoellipticity and comparison principle for partial differential equations of Black-Scholes type ⋮ Pricing options in illiquid markets: optimal systems, symmetry reductions and exact solutions ⋮ Liquidity risk and the term structure of interest rates ⋮ Optimal execution strategies in limit order books with general shape functions ⋮ Risk arbitrage and hedging to acceptability under transaction costs ⋮ AN ANALYSIS OF THE SUPPLY CURVE FOR LIQUIDITY RISK THROUGH BOOK DATA ⋮ Liquidity risk theory and coherent measures of risk ⋮ Optimal investment strategies with a reallocation constraint ⋮ Pricing European options in a discrete time model for the limit order book ⋮ A dynamic model of the limit order book ⋮ Hedging in an illiquid binomial market ⋮ A model for a large investor trading at market indifference prices. II: Continuous-time case. ⋮ Optimal liquidation strategies and their implications ⋮ Optimal Investment with Transient Price Impact ⋮ Hedge and Speculate: Replicating Option Payoffs with Limit and Market Orders ⋮ On derivatives with illiquid underlying and market manipulation ⋮ Computation of estimates in segmented regression and a liquidity effect model ⋮ No arbitrage without semimartingales ⋮ Optimal control of ultradiffusion processes with application to mathematical finance ⋮ Optimal growth rate in random trade time ⋮ Mean-Variance Hedging with Uncertain Trade Execution ⋮ Bid-ask dynamic pricing in financial markets with transaction costs and liquidity risk ⋮ A Mathematical Theory of Financial Bubbles ⋮ Regression models for double discrete distributions ⋮ Liquidity Risk with Coherent Risk Measures ⋮ A model for a large investor trading at market indifference prices. I: Single-period case ⋮ A CONCISE CHARACTERIZATION OF OPTIMAL CONSUMPTION WITH LOGARITHMIC PREFERENCES ⋮ RESILIENT PRICE IMPACT OF TRADING AND THE COST OF ILLIQUIDITY ⋮ Optimal execution strategy in the presence of permanent price impact and fixed transaction cost ⋮ Reduced form modeling of limit order markets ⋮ A liquidity-based model for asset price bubbles ⋮ Hedging, arbitrage and optimality with superlinear frictions ⋮ Dynamic equilibrium limit order book model and optimal execution problem ⋮ Superreplication when trading at market indifference prices

This page was built for publication: Liquidity risk and arbitrage pricing theory