Utility based option pricing with proportional transaction costs and diversification problems: An interior-point optimization approach

DOI10.1016/S0168-9274(98)00104-4zbMATH Open0997.91032OpenAlexW1988454980MaRDI QIDQ1294549FDOQ1294549

E. D. Andersen, Anders Damgaard

Publication date: 19 November 2002

Published in: Applied Numerical Mathematics (Search for Journal in Brave)

Full work available at URL: https://doi.org/10.1016/s0168-9274(98)00104-4

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• Utility based option evaluation with proportional transaction costs
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zbMATH Keywords

stochastic programmingtransaction costsdiversificationEuropean call optioninterior-point algorithmoptimal portfolio choiceinterior-point optimizationreservation purchaserisky security

Mathematics Subject Classification ID

Derivative securities (option pricing, hedging, etc.) (91G20) Interior-point methods (90C51) Stochastic programming (90C15) Special problems of linear programming (transportation, multi-index, data envelopment analysis, etc.) (90C08)

Cites Work

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• A globally convergent primal-dual interior point algorithm for convex programming
• A stochastic programming model for funding single premium deferred annuities
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Cited In (8)

• American option valuation in a stochastic volatility model with transaction costs
• Option pricing by large risk aversion utility under transaction costs
• European option pricing and hedging with both fixed and proportional transaction costs
• Foreign currency option pricing with proportional transaction costs
• Optimal R\&D investment for a risk-averse entrepreneur
• Computation of reservation prices of options with proportional transaction costs
• Utility based option evaluation with proportional transaction costs
• Efficient analytic approximation of the optimal hedging strategy for a European call option with transaction costs

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