Journal article

A system of quadratic BSDEs arising in a price impact model

Abstract:: We consider a financial model where the prices of risky assets are quoted by a representative market maker who takes into account an exogenous demand. We characterize these prices in terms of a system of BSDEs with quadratic growth. We show that this system admits a unique solution for every bounded demand if and only if the market maker’s risk-aversion is sufficiently small. The uniqueness is established in the natural class of solutions, without any additional norm restrictions. To the best of our knowledge, this is the first study that proves such (global) uniqueness result for a system of fully coupled quadratic BSDEs.

Publication status:: Published

Peer review status:: Peer reviewed

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APA Style

Kramkov, D., & Pulido, S. (2016). A system of quadratic BSDEs arising in a price impact model. Annals of Applied Probability, 26(2), 794–817.

MLA Style

Kramkov, D., and S. Pulido. “A System of Quadratic BSDEs Arising in a Price Impact Model.” Annals of Applied Probability, vol. 26, no. 2, Institute of Mathematical Statistics, 2016, pp. 794–817.

Chicago Style

Kramkov, D, and S Pulido. 2016. “A System of Quadratic BSDEs Arising in a Price Impact Model.” Annals of Applied Probability 26 (2): 794–817.
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Files:: 2016_AAP.pdf

(Preview, Version of record, pdf, 208.1KB, Terms of use)

Publisher copy:: 10.1214/15-AAP1103

Authors

+ Kramkov, D More by this author

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

+ Pulido, S More by this author

Role:: Author

Publisher:: Institute of Mathematical Statistics
Journal:: Annals of Applied Probability More from this journal
Volume:: 26
Issue:: 2
Pages:: 794-817
Publication date:: 2016-03-22
DOI:: 10.1214/15-AAP1103
ISSN:: 1050-5164

Keywords:: SBTMR
Pubs id:: pubs:479987
UUID:: uuid:ce71cc9c-45d4-4620-a225-c2d098d0f730
Local pid:: pubs:479987
Source identifiers:: 479987
Deposit date:: 2017-01-20

Terms of use

Copyright holder:: Institute of Mathematical Statistics
Copyright date:: 2016
Notes:: © Institute of Mathematical Statistics, 2016

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

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