Pith Number

pith:NLSF4PDW

pith:2025:NLSF4PDW5LN773HFNL2BG6VVIN

not attested not anchored not stored refs resolved

Option market making with hedging-induced market impact

Etienne Chevalier, Paulin Aubert, Vathana Ly Vath

Option market makers' hedging trades generate permanent and transient impact on the underlying asset, coupling it to option order flow in a well-posed mixed control problem.

arxiv:2511.02518 v2 · 2025-11-04 · q-fin.TR · math.PR

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The bundle contains the canonical record plus signed events. A mirror can host it anywhere and recompute the same current state with the deterministic merge algorithm.

Claims

C1strongest claim

The mixed control problem, which involves continuous quoting decisions and impulsive hedging actions, is well-posed; optimal strategies can be approximated numerically to illustrate the interplay between option market liquidity, inventory risk, and underlying impact.

C2weakest assumption

Option order flow is modeled by Cox processes whose intensities depend on the state of the underlying asset and on the market maker's quoted prices, combined with both permanent and transient impact from hedging trades (as stated in the abstract description of the dynamics).

C3one line summary

Develops a stochastic control model for option market making with hedging-induced impact on the underlying, analyzes manipulation and arbitrage risks, proves well-posedness of the mixed control problem, and numerically approximates optimal strategies via policy optimization.

References

16 extracted · 16 resolved · 0 Pith anchors

[1] Optimal execution and price manipulations in time- varying limit order books 2014

[2] Dynamic optimal execution in a mixed-market-impact Hawkes price model 2016

[3] Optimal execution of portfolio transactions 2001 · doi:10.21314/jor.2001.041

[4] High Frequency Trading in a Limit Order Book 2008 · doi:10.1080/14697680701381228

[5] Quantitative Finance , volume = 2021 · doi:10.1080/14697688.2020.1766099

Formal links

2 machine-checked theorem links

Receipt and verification

First computed	2026-06-03T01:05:46.104192Z
Builder	pith-number-builder-2026-05-17-v1
Signature	Pith Ed25519 (`pith-v1-2026-05`) · public key
Schema	pith-number/v1.0

Canonical hash

6ae45e3c76eadbffece56af4137ab5436bf6f70f57ebde6de13aeee85d44c850

Aliases

arxiv: 2511.02518 · arxiv_version: 2511.02518v2 · doi: 10.48550/arxiv.2511.02518 · pith_short_12: NLSF4PDW5LN7 · pith_short_16: NLSF4PDW5LN773HF · pith_short_8: NLSF4PDW

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Verify this Pith Number yourself

curl -sH 'Accept: application/ld+json' https://pith.science/pith/NLSF4PDW5LN773HFNL2BG6VVIN \
  | jq -c '.canonical_record' \
  | python3 -c "import sys,json,hashlib; b=json.dumps(json.loads(sys.stdin.read()), sort_keys=True, separators=(',',':'), ensure_ascii=False).encode(); print(hashlib.sha256(b).hexdigest())"
# expect: 6ae45e3c76eadbffece56af4137ab5436bf6f70f57ebde6de13aeee85d44c850

Canonical record JSON

{
  "metadata": {
    "abstract_canon_sha256": "1904462c7db188e64137bf09938eeca0b7b1dbfd4f45cc4bc52e1fb73a39de50",
    "cross_cats_sorted": [
      "math.PR"
    ],
    "license": "http://creativecommons.org/licenses/by/4.0/",
    "primary_cat": "q-fin.TR",
    "submitted_at": "2025-11-04T12:13:44Z",
    "title_canon_sha256": "e9440b286ed657a63d17619c874e1f91e1cf55129151aa002e146e3395180f1d"
  },
  "schema_version": "1.0",
  "source": {
    "id": "2511.02518",
    "kind": "arxiv",
    "version": 2
  }
}