Journal article

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. As a result, we show that the model’s evolution can be described by a nonlinear stochastic differential equation for the market makers’ expected utilities.

Publication status:: Published

Peer review status:: Peer reviewed

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APA Style

Bank, P., & Kramkov, D. (2015). A model for a large investor trading at market indifference prices. II: Continuous-time case. Annals of Applied Probability, 25(5), 2708–2742.

MLA Style

Bank, P., and D. Kramkov. “A Model for a Large Investor Trading at Market Indifference Prices. II: Continuous-Time Case.” Annals of Applied Probability, vol. 25, no. 5, Institute of Mathematical Statistics, 2015, pp. 2708–42.

Chicago Style

Bank, P, and D Kramkov. 2015. “A Model for a Large Investor Trading at Market Indifference Prices. II: Continuous-Time Case.” Annals of Applied Probability 25 (5): 2708–42.
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Files:: 2015_AAP.pdf

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Publisher copy:: 10.1214/14-AAP1059

Authors

+ Bank, P More by this author

Role:: Author

+ Kramkov, D More by this author

Institution:: University of Oxford
Division:: MPLS
Department:: Mathematical Institute
Role:: Author

Publisher:: Institute of Mathematical Statistics
Journal:: Annals of Applied Probability More from this journal
Volume:: 25
Issue:: 5
Pages:: 2708-2742
Publication date:: 2015-10-01
DOI:: 10.1214/14-AAP1059
ISSN:: 1050-5164

Keywords:: SBTMR
Pubs id:: pubs:567780
UUID:: uuid:317e1052-0b95-4dd8-bd8c-872f154ae548
Local pid:: pubs:567780
Source identifiers:: 567780
Deposit date:: 2017-01-20

Terms of use

Copyright holder:: Institute of Mathematical Statistics
Copyright date:: 2015
Notes:: © Institute of Mathematical Statistics, 2015

Licence:: Terms and Conditions of Use for Oxford University Research Archive

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