Abstract

http://ssrn.com/abstract=2317344
 
 

References (37)



 


 



Hedging, Arbitrage, and Optimality with Superlinear Frictions


Paolo Guasoni


Boston University - Department of Mathematics and Statistics; Dublin City University - School of Mathematical Sciences

Miklos Rasonyi


University of Edinburgh - School of Mathematics

August 28, 2013

Boston U. School of Management Research Paper No. 2013-8

Abstract:     
In a continuous-time model with multiple assets described by cadlag processes, this paper characterizes superhedging prices, absence of arbitrage, and utility maximizing strategies, under general frictions that make execution prices arbitrarily unfavorable for high trading intensity. With such frictions, dual elements correspond to a pair of a shadow execution price combined with an equivalent martingale measure. For utility functions defined on the real line, optimal strategies exist even if arbitrage is present, because it is not scalable at will.

Number of Pages in PDF File: 23

Keywords: hedging, arbitrage, price-impact, frictions, utility maximization

JEL Classification: G11, G12

working papers series


Download This Paper

Date posted: August 28, 2013 ; Last revised: October 9, 2013

Suggested Citation

Guasoni, Paolo and Rasonyi, Miklos, Hedging, Arbitrage, and Optimality with Superlinear Frictions (August 28, 2013). Boston U. School of Management Research Paper No. 2013-8. Available at SSRN: http://ssrn.com/abstract=2317344 or http://dx.doi.org/10.2139/ssrn.2317344

Contact Information

Paolo Guasoni (Contact Author)
Boston University - Department of Mathematics and Statistics ( email )
Boston, MA 02215
United States
Dublin City University - School of Mathematical Sciences ( email )
Dublin
Ireland
HOME PAGE: http://www.guasoni.com
Miklos Rasonyi
University of Edinburgh - School of Mathematics ( email )
United Kingdom
Feedback to SSRN


Paper statistics
Abstract Views: 718
Downloads: 114
Download Rank: 142,246
References:  37

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo6 in 3.391 seconds