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Title:No free lunch for large investors PDF Logo
Authors:Bank, Peter
Issue Date:1999
Series/Report no.:Discussion Papers, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes 1999,37
Abstract:We study an extension of the classical B1ack-Scholes model which accounts for feedback effects from trading in an imperfectly elastic market. The proposed semi-martingale model may be viewed as a compromise between the diffusion approach in, e.g., (Cuoco and Cvitanic 1998), (Cvitanic and Ma 1996) and the reaction function framework used in, e.g., (Jarrow 1992), (Frey and Stremme 1997). We motivate our model by a discrete-time approximation and provide sufficient conditions which exclude arbitrage opportunities for large investors.
Subjects:large investor
feedback effect
no arbitrage
illiquid markets
market elasticity
Persistent Identifier of the first edition:urn:nbn:de:kobv:11-10046980
Document Type:Working Paper
Appears in Collections:Discussion Papers, SFB 373, HU Berlin

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