On a stochastic differential equation arising in a price impact model

DOI10.1016/J.SPA.2012.10.011MaRDI QIDQ1940246zbMATH OpenOpenAlexWikidataFDO

Authors Peter Bank, Dmitry Kramkov

Publication date 6 March 2013

Published in Stochastic Processes and their Applications (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1110.3250

zbMATH Keywords

Clark-Ocone formulalarge investorMalliavin derivativePareto allocationprice impactSobolev embeddingstochastic differential equation

Mathematics Subject Classification ID

PDEs in connection with game theory, economics, social and behavioral sciences (35Q91) Stochastic partial differential equations (aspects of stochastic analysis) (60H15)

Abstract: We provide sufficient conditions for the existence and uniqueness of solutions to a stochastic differential equation which arises in a price impact model. These conditions are stated as smoothness and boundedness requirements on utility functions or Malliavin differentiability of payoffs and endowments.

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Cited in

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• A system of quadratic BSDEs arising in a price impact model
• The stochastic field of aggregate utilities and its saddle conjugate
• Optimal investment, derivative demand, and arbitrage under price impact
• A stochastic differential equation driven by Poisson random measure and its application in a duopoly market
• A model for a large investor trading at market indifference prices. II: Continuous-time case.

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