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.
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Lions et al. (2006) studied this question.
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