Séminaire: Arbitrage Trading with Marking-to-Market and Price Impact

9 juin 2014

12 juin 2014Paris

Speaker: Igor Makarov (London School of Economcis)

Date: Thursday, June 12th, 2014 at 2.00 p.m.

Location: IESEG School of Management, Socle de la Grande Arche, 1 Parvis de la Défense, 92044 Paris la Défense

Room : R20 (B252)


The paper studies trading decisions of money managers whose profit is marked- to-market and who trade in markets with price impact. I show that in their chase after good performance record managers may accumulate excessively large arbitrage positions and therefore, push prices above their fundamental levels. This may result in very large losses for investors.