Liquidity in a binomial market

DOI10.1111/J.1467-9965.2010.00462.XMaRDI QIDQ4906530zbMATH OpenOpenAlexWikidataFDO

Authors Selim Gökay, H. Mete Soner

Publication date 28 February 2013

Published in Mathematical Finance (Search for Journal in Brave)

Full work available at URL https://doi.org/10.1111/j.1467-9965.2010.00462.x

zbMATH Keywords

dynamic programmingbinomial modelliquiditysuper-replication

Mathematics Subject Classification ID

Derivative securities (option pricing, hedging, etc.) (91G20) Numerical methods (including Monte Carlo methods) (91G60) Martingales with continuous parameter (60G44) Stochastic integrals (60H05)

Recommendations

• Hedging in an illiquid binomial market
• Duality and convergence for binomial markets with friction
• Option replication in discrete time with illiquidity
• MODELING LIQUIDITY EFFECTS IN DISCRETE TIME
• Option replication in discrete time with the cost of illiquidity

Cites work

• scientific article; zbMATH DE number 158461 (Why is no real title available?)
• A model of optimal portfolio selection under liquidity risk and price impact
• Dynamic programming for stochastic target problems and geometric flows
• Exit Time Problems in Optimal Control and Vanishing Viscosity Method
• General Black-Scholes models accounting for increased market volatility from hedging strategies
• Hedging and Portfolio Optimization in Financial Markets with a Large Trader
• Liquidity risk and arbitrage pricing theory
• MODELING LIQUIDITY EFFECTS IN DISCRETE TIME
• Market volatility and feedback effects from dynamic hedging
• On Feedback Effects from Hedging Derivatives
• Option hedging for small investors under liquidity costs
• Option pricing with transaction costs and a nonlinear Black-Scholes equation
• Perfect option hedging for a large trader
• Periodic homogenisation of certain fully nonlinear partial differential equations
• Second-order backward stochastic differential equations and fully nonlinear parabolic PDEs
• Superreplication Under Gamma Constraints
• The cost of illiquidity and its effects on hedging
• User’s guide to viscosity solutions of second order partial differential equations

Cited in

(18)

• Implied trees in illiquid markets: A Choquet pricing approach
• Hedging in an illiquid binomial market
• Utility maximization in an illiquid market in continuous time
• Liquidity and market incompleteness
• Pricing Liquidity in the Stock Market
• Multivariate Hawkes-based models in limit order book: European and spread option pricing
• Option replication in discrete time with illiquidity
• Duality and convergence for binomial markets with friction
• Local risk-minimization with multiple assets under illiquidity with applications in energy markets
• Super-replication with nonlinear transaction costs and volatility uncertainty
• Scaling limits for super-replication with transient price impact
• Merton problem in an infinite horizon and a discrete time with frictions
• Utility maximization in an illiquid market
• Option hedging for small investors under liquidity costs
• Liquidity risk and the term structure of interest rates
• Resilient price impact of trading and the cost of illiquidity
• Superreplication when trading at market indifference prices
• Pricing European options in a discrete time model for the limit order book

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