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t Vt = Vo + f H, dX~ Ct, t > O , o where H is an integrand for X, and C is an adapted increasing process. We call such a representation optional because, in contrast to the Doob-Meye r decomposition, it generally exists only with an adapted (optional) process C. We apply this decomposition to the problem of hedging European and American style contingent… (More)
A large financial market is described by a sequence of standard general models of continuous trading. It turns out that the absence of asymptotic arbitrage of the first kind is equivalent to the contiguity of sequence of objective probabilities with respect to the sequence of upper envelopes of equivalent martingale measures, while absence of asymptotic… (More)
The existence of complete Radner equilibria is established in an economy whose parameters are driven by a diffusion process. Our results complement those in the literature. In particular, we work under essentially minimal regularity conditions and treat the timeinhomogeneous case. MSC: 91B50, 91B51, 60G44, 26E05.
We provide sufficient conditions for the existence and uniqueness of solutions to a stochastic differential equation which arises in the price impact model developed in  and . These conditions are stated as smoothness and boundedness requirements on utility functions or Malliavin differentiability of payoffs and endowments.
We develop a continuous-time model for a large investor trading at market indifference prices. In analogy to the construction of stochastic integrals, we investigate the transition from simple to general predictable strategies. A key role is played by a stochastic differential equation for the market makers’ utility process. The analysis of this equation… (More)
We develop a single-period model for a large economic agent who trades with market makers at their utility indifference prices. We compute the sensitivities of these market indifference prices with respect to the size of the investor’s order. It turns out that the price impact of an order is determined both by the market makers’ joint risk tolerance and by… (More)