RT Journal Article
T1 Nonconvex optimization for pricing and hedging in imperfect markets
A1 Balbás, Alejandro
A1 Mayoral, Silvia
AB The paper deals with imperfect financial markets and provides new methods to overcomemany inefficiencies caused by frictions. Transaction costs are quite general and far from linearor convexo The concepts of pseudoarbitrage and efficiency are introduced and deeply analyzed bymeans of both scalar and vector optimization problems. Their optimality conditions and solutionsyield strategies to invest and hedging portfolios, as well as bid-ask spread improvements. They alsopoint out the role of coalitions when dealing with these markets. Several sensitivity results will permitus to show that a significant transaction costs reduction is very often feasible in practice, as well as tomeasure its effect on the general efficiency of the market. AII these findings may be especially importantfor many emerging and still illiquid spot or derivative markets (electricity markets, com oditymarkets, markets related to weather, infiation-linked or insurance-linked derivatives, etc.).
PB Elsevier
SN 0898-1221
YR 2006
FD 2006-07
LK https://hdl.handle.net/10016/13024
UL https://hdl.handle.net/10016/13024
LA eng
NO Partially funded by "Comunidad Autónoma de Madrid" and Spanish Ministry of Science and Education (ref:BEC2003-09067 -C04-03).
DS e-Archivo
RD 1 may. 2024