Large investor trading impacts on volatility

  • Pierre-Louis Lions

    CEREMADE – UMR C.N.R.S. 7534, Université Paris 9 – Dauphine, Place du Maréchal de Lattre de Tassigny, 75775 Paris Cedex 16, France, Collège de France, 11, place Marcelin Berthelot, 75005 Paris, France
  • Jean-Michel Lasry

    CALYON, 9, Quai du Président Paul Doumer, 92920 Paris, La défense cedex, France


We begin with this paper a series devoted to a tentative model for the influence of hedging on the dynamics of an asset. We study here the case of a “large” investor and solve two problems in the context of such a model namely the question of the fair value (or liquidative value) of a “large” position and the question of pricing or hedging an option. In order to do so, we use a utility maximization approach and some new results in stochastic control theory.

Cite this article

Pierre-Louis Lions, Jean-Michel Lasry, Large investor trading impacts on volatility. Ann. Inst. H. Poincaré Anal. Non Linéaire 24 (2007), no. 2, pp. 311–323

DOI 10.1016/J.ANIHPC.2005.12.006