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A model for a large investor trading at market indifference prices. II: Continuous-time case

Abstract:

We develop from basic economic principles a continuous-time model for a large investor who trades with a finite number of market makers at their utility indifference prices. In this model, the market makers compete with their quotes for the investor’s orders and trade among themselves to attain Pareto optimal allocations. We first consider the case of simple strategies and then, in analogy to the construction of stochastic integrals, investigate the transition to general continuous dynamics. ...

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Publication status:
Published
Peer review status:
Peer reviewed
Version:
Publisher's Version

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Publisher copy:
10.1214/14-AAP1059

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Department:
Oxford, MPLS, Mathematical Institute
Publisher:
Institute of Mathematical Statistics Publisher's website
Journal:
The Annals of Applied Probability Journal website
Volume:
25
Issue:
5
Pages:
2708-2742
Publication date:
2015-10-16
DOI:
ISSN:
1050-5164
Pubs id:
pubs:567780
URN:
uri:317e1052-0b95-4dd8-bd8c-872f154ae548
UUID:
uuid:317e1052-0b95-4dd8-bd8c-872f154ae548
Local pid:
pubs:567780
Keywords:

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