By a News Reporter-Staff News Editor at Investment Weekly News -- Investigators discuss new findings in Finance - Finance and Stochastics. According to news reporting originating in Toyonaka, Japan, by VerticalNews journalists, research stated, “We model a nonlinear price curve quoted in a market as the utility indifference curve of a representative liquidity supplier. As the utility function, we adopt a -expectation.”
The news reporters obtained a quote from the research from Osaka University, “In contrast to the standard framework of financial engineering, a trader is no longer a price taker as any trade has a permanent market impact via an effect on the supplier’s inventory. The P&L of a trading strategy is written as a nonlinear stochastic integral. Under this market impact model, we introduce a completeness condition under which any derivative can be perfectly replicated by a dynamic trading strategy.”
According to the news reporters, the research concluded: “In the special case of a Markovian setting, the corresponding pricing and hedging can be done by solving a semilinear PDE.”
For more information on this research see: Perfect hedging under endogenous permanent market impacts. Finance and Stochastics , 2018;22(2):417-442. Finance and Stochastics can be contacted at: Springer Heidelberg, Tiergartenstrasse 17, D-69121 Heidelberg, Germany. (Springer - www.springer.com; Finance and Stochastics - http://www.springerlink.com/content/0949-2984/)
Our news correspondents report that additional information may be obtained by contacting M. Fukasawa, Osaka University, Grad Sch Engn Sci, Toyonaka, Osaka, Japan.
The direct object identifier (DOI) for that additional information is: https://doi.org/10.1007/s00780-017-0352-4. This DOI is a link to an online electronic document that is either free or for purchase, and can be your direct source for a journal article and its citation.
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CITATION: (2018-04-21), Reports on Finance and Stochastics Findings from Osaka University Provide New Insights (Perfect hedging under endogenous permanent market impacts), Investment Weekly News, 644, ISSN: 1945-8185, BUTTER® ID: 015502168
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