Optimal hedging of an informed broker facing many traders
Fuente:
arXiv
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| Autores principales: | , , |
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| Formato: | Preprint |
| Publicado: |
2025
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| Materias: | |
| Acceso en línea: | |
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| _version_ | 1866910998985703424 |
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| author | Bergault, Philippe Cardaliaguet, Pierre Yan, Wenbin |
| author_facet | Bergault, Philippe Cardaliaguet, Pierre Yan, Wenbin |
| contents | This paper investigates the optimal hedging strategies of an informed broker interacting with multiple traders in a financial market. We develop a theoretical framework in which the broker, possessing exclusive information about the drift of the asset's price, engages with traders whose trading activities impact the market price. Using a mean-field game approach, we derive the equilibrium strategies for both the broker and the traders, illustrating the intricate dynamics of their interactions. The broker's optimal strategy involves a Stackelberg equilibrium, where the broker leads and the traders follow. Our analysis also addresses the mean field limit of finite-player models and shows the convergence to the mean-field solution as the number of traders becomes large. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2506_08992 |
| institution | arXiv |
| publishDate | 2025 |
| record_format | arxiv |
| spellingShingle | Optimal hedging of an informed broker facing many traders Bergault, Philippe Cardaliaguet, Pierre Yan, Wenbin Trading and Market Microstructure Optimization and Control This paper investigates the optimal hedging strategies of an informed broker interacting with multiple traders in a financial market. We develop a theoretical framework in which the broker, possessing exclusive information about the drift of the asset's price, engages with traders whose trading activities impact the market price. Using a mean-field game approach, we derive the equilibrium strategies for both the broker and the traders, illustrating the intricate dynamics of their interactions. The broker's optimal strategy involves a Stackelberg equilibrium, where the broker leads and the traders follow. Our analysis also addresses the mean field limit of finite-player models and shows the convergence to the mean-field solution as the number of traders becomes large. |
| title | Optimal hedging of an informed broker facing many traders |
| topic | Trading and Market Microstructure Optimization and Control |
| url | https://arxiv.org/abs/2506.08992 |