Trading Constraints

Robert Jarrow ()

Chapter 9 in The Economic Foundations of Risk Management:Theory, Practice, and Applications, 2017, pp 71-76 from World Scientific Publishing Co. Pte. Ltd.

Abstract: This chapter discusses the impact of trading constraints on pricing and hedging in arbitrage-free markets. Trading constraints are important because in almost all of the risk management failures discussed in Part VI of this book, funding risk is a contributing cause of the institution’s failure. Recall that funding risk is the risk generated by the interaction of liquidity risk and binding trading constraints. This chapter is based on Jarrow [35, 36].

Keywords: Risk Management; Derivatives; Value-at-Risk; Funding Risk; Financial Engineering (search for similar items in EconPapers)
JEL-codes: G31 (search for similar items in EconPapers)
Date: 2017
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