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Author(s): Moreau, L; Muhle-Karbe, J; Soner, H Mete

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Abstract: © 2015 Wiley Periodicals, Inc. An investor trades a safe and several risky assets with linear price impact to maximize expected utility from terminal wealth. In the limit for small impact costs, we explicitly determine the optimal policy and welfare, in a general Markovian setting allowing for stochastic market, cost, and preference parameters. These results shed light on the general structure of the problem at hand, and also unveil close connections to optimal execution problems and to other market frictions such as proportional and fixed transaction costs.
Publication Date: 1-Apr-2017
Citation: Moreau, L, Muhle-Karbe, J, Soner, HM. (2017). TRADING WITH SMALL PRICE IMPACT. Mathematical Finance, 27 (2), 350 - 400. doi:10.1111/mafi.12098
DOI: doi:10.1111/mafi.12098
ISSN: 0960-1627
EISSN: 1467-9965
Pages: 350 - 400
Type of Material: Journal Article
Journal/Proceeding Title: Mathematical Finance
Version: Author's manuscript

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