Limit theorems for partial hedging under transaction costs (Q2875729)

The author considers a Black and Scholes like model and studies the problem of minimizing the shortfall risk of a path dependent claim in the presence of proportional transaction costs. The shortfall is defined as the maximal (with respect to stopping times) expected excess of the given contingent claim relatively to the value at liquidation of a given portfolio. The author shows that the minimal expected shortfall can be attained (Theorem 2.1) and that such minimum value can be approximated arbitrarily well by taking a sequence of binomial models (Theorem 2.2).