A model for a large investor trading at market indifference prices. I: Single-period case

@article{Bank2015AMF,
  title={A model for a large investor trading at market indifference prices. I: Single-period case},
  author={Peter Bank and Dmitry O. Kramkov},
  journal={Finance and Stochastics},
  year={2015},
  volume={19},
  pages={449-472}
}
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 the variation of individual risk tolerances. On a technical level, a key role in our analysis is played by a pair of conjugate saddle… 
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25 Citations

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