Nonconvex optimization for pricing and hedging in imperfect markets

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dc.contributor.author Balbás, Alejandro
dc.contributor.author Mayoral, Silvia
dc.date.accessioned 2012-01-20T18:51:40Z
dc.date.available 2012-01-20T18:51:40Z
dc.date.issued 2006-07
dc.identifier.bibliographicCitation Computers & Mathematics with Applications, 2006, v. 52, nº 1-2, pp. 121-136
dc.identifier.issn 0898-1221
dc.identifier.uri http://hdl.handle.net/10016/13024
dc.description.abstract The paper deals with imperfect financial markets and provides new methods to overcome many inefficiencies caused by frictions. Transaction costs are quite general and far from linear or convexo The concepts of pseudoarbitrage and efficiency are introduced and deeply analyzed by means of both scalar and vector optimization problems. Their optimality conditions and solutions yield strategies to invest and hedging portfolios, as well as bid-ask spread improvements. They also point out the role of coalitions when dealing with these markets. Several sensitivity results will permit us to show that a significant transaction costs reduction is very often feasible in practice, as well as to measure its effect on the general efficiency of the market. AII these findings may be especially important for many emerging and still illiquid spot or derivative markets (electricity markets, com odity markets, markets related to weather, infiation-linked or insurance-linked derivatives, etc.).
dc.description.sponsorship Partially funded by "Comunidad Autónoma de Madrid" and Spanish Ministry of Science and Education (ref: BEC2003-09067 -C04-03).
dc.format.mimetype application/pdf
dc.language.iso eng
dc.publisher Elsevier
dc.rights ©Elsevier
dc.subject.other Global optimization
dc.subject.other Pseudoarbitrage
dc.subject.other Spread reduction
dc.subject.other Balance point
dc.title Nonconvex optimization for pricing and hedging in imperfect markets
dc.type article
dc.description.status Publicado
dc.relation.publisherversion http://dx.doi.org/10.1016/j.camwa.2006.08.009
dc.subject.eciencia Empresa
dc.identifier.doi 10.1016/j.camwa.2006.08.009
dc.rights.accessRights openAccess
dc.type.version acceptedVersion
dc.identifier.publicationfirstpage 121
dc.identifier.publicationissue 1-2
dc.identifier.publicationlastpage 136
dc.identifier.publicationtitle Computers & Mathematics with Applications
dc.identifier.publicationvolume 52
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