Hedging nontradable risks with transaction costs and price impact
A risk-averse agent hedges her exposure to a nontradable risk factor U using a correlated traded asset S and accounts for the impact of her trades on both factors. The effect of the agent's trades on U is referred to as cross-impact. By solving the agent's stochastic control problem, we ob...
| Main Authors: | , , |
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| Format: | Journal article |
| Language: | English |
| Published: |
Wiley
2020
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