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Applied Math Seminar A Parametric Model for Liquidity Effects in Derivative Pricing and Hedging |
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The work described in this talk, jointly with David Bakstein, deals with a model for pricing and hedging derivatives in a market where trading incurs transaction costs and causes price slippage. We formulate discrete and continuous-time models, analyse them approximately and numerically, and show that the model can be calibrated to (equity) market data. |