Pricing and Hedging Financial Derivatives in Merger\&Acquisition Deals with Price Impact
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arXiv
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| Autores principales: | , , |
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| Formato: | Preprint |
| Publicado: |
2026
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| _version_ | 1866918464467238912 |
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| author | Barucci, Emilio Lan, Yuheng Marazzina, Daniele |
| author_facet | Barucci, Emilio Lan, Yuheng Marazzina, Daniele |
| contents | We investigate the optimal execution of contracts that are used in merger\&acquisition deals. We consider cash-settled and physically delivered contracts between a broker and a counterpart. Contracts are linear (total returns swaps), nonlinear (collar contracts) or Asian type (TWAP based contracts). We derive the optimal execution strategy and the optimal fee through indifference utility arguments allowing for linear market effects of trades. We show that linear cash-settled contracts are more expensive and more exposed to manipulation/statistical arbitrages by the broker. Also nonlinear and Asian type contracts are exposed to these phenomena. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2604_21581 |
| institution | arXiv |
| publishDate | 2026 |
| record_format | arxiv |
| spellingShingle | Pricing and Hedging Financial Derivatives in Merger\&Acquisition Deals with Price Impact Barucci, Emilio Lan, Yuheng Marazzina, Daniele Mathematical Finance Trading and Market Microstructure We investigate the optimal execution of contracts that are used in merger\&acquisition deals. We consider cash-settled and physically delivered contracts between a broker and a counterpart. Contracts are linear (total returns swaps), nonlinear (collar contracts) or Asian type (TWAP based contracts). We derive the optimal execution strategy and the optimal fee through indifference utility arguments allowing for linear market effects of trades. We show that linear cash-settled contracts are more expensive and more exposed to manipulation/statistical arbitrages by the broker. Also nonlinear and Asian type contracts are exposed to these phenomena. |
| title | Pricing and Hedging Financial Derivatives in Merger\&Acquisition Deals with Price Impact |
| topic | Mathematical Finance Trading and Market Microstructure |
| url | https://arxiv.org/abs/2604.21581 |