Finance and Stochastics

, Volume 20, Issue 3, pp 741–771 | Cite as

Almost-sure hedging with permanent price impact

  • Bruno BouchardEmail author
  • Grégoire Loeper
  • Yiyi Zou


We consider a financial model with permanent price impact. Continuous-time trading dynamics are derived as the limit of discrete rebalancing policies. We then study the problem of superhedging a European option. Our main result is the derivation of a quasilinear pricing equation. It holds in the sense of viscosity solutions. When it admits a smooth solution, it provides a perfect hedging strategy.


Hedging Price impact 

Mathematics Subject Classification

91G20 93E20 49L20 

JEL Classification

G13 G12 


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Copyright information

© Springer-Verlag Berlin Heidelberg 2016

Authors and Affiliations

  1. 1.CEREMADEUniversité Paris Dauphine, and CREST-ENSAEParis cedex 16France
  2. 2.BNP-Paribas and FiQuant—Chaire de Finance QuantitativeParisFrance

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