TRADING WITH SMALL PRICE IMPACT

By Ludovic Moreau, Johannes Muhle‐Karbe, H. M. Soner. 2014

59 citations recorded by the source corpus.

An investor trades a safe and several risky assets with linear price impact to maximize expected utility from terminal wealth. In the limit for small impact costs, we explicitly determine the optimal policy and welfare, in a general Markovian setting allowing for stochastic market, cost, and preference parameters. These results shed light on the general structure of the problem at hand, and also unveil close connections to optimal execution problems and to other market frictions such as proportional and fixed transaction costs.

Subfields: Finance, Management Science and Operations Research

View Paper: https://www.semanticscholar.org/paper/008b15c4e9762031d4a8aabb52209731eb225828

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Finance

1. Christian Beck
2. Arnulf Jentzen
3. W. E
4. Peter E. Kloeden
5. Xuerong Mao
6. Maizar Raissi
7. Sotirios Sabanis
8. Timon Rabczuk

In Management Science and Operations Research

1. Christian Beck
2. W. E
3. Arnulf Jentzen
4. Sotirios Sabanis

Citations in the corpus

• Machine Learning Approximation Algorithms for High-Dimensional Fully Nonlinear Partial Differential Equations and Second-order Backward Stochastic Differential Equations (2017, background): “ee, e.g., [4, 5, 109] for models for the pricing of nancial derivatives on untradable underlyings such as nancial derivatives on the temperature or mortality-dependent nancial derivatives, see, e.g., [1, 36, 83] for models incorporating that the trading strategy in uences the price processes though ”