Hedging of covered options with linear market impact and gamma constraint
Résumé
Within a financial model with linear price impact, we study the problem of hedging a covered European option under gamma constraint. Using stochastic target and partial differential equation smoothing techniques, we prove that the super-replication price is the viscosity solution of a fully non-linear parabolic equation. As a by-product, we show how "-optimal strategies can be constructed. Finally, a numerical resolution scheme is proposed.
Origine | Fichiers produits par l'(les) auteur(s) |
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