On the possibility of hedging options in the presence of transaction costs

DOI10.1214/aoap/1034625338zbMath0883.90018OpenAlexW2080910730MaRDI QIDQ1364395

Shlomo Levental, Anatoli V. Skorokhod

Publication date: 25 August 1997

Published in: The Annals of Applied Probability (Search for Journal in Brave)

Full work available at URL: https://doi.org/10.1214/aoap/1034625338

zbMATH Keywords

continuous-timehedging a generalized call option

Mathematics Subject Classification ID

Applications of stochastic analysis (to PDEs, etc.) (60H30) Derivative securities (option pricing, hedging, etc.) (91G20)

Related Items (34)

Explicit solution to the multivariate super-replication problem under transaction costs. ⋮ General indifference pricing with small transaction costs ⋮ Asymptotic replication with modified volatility under small transaction costs ⋮ Super-replication with nonlinear transaction costs and volatility uncertainty ⋮ Hedging under Transaction Costs in Currency Markets: a Discrete-Time Model ⋮ Hedging under Transaction Costs in Currency Markets: a Continuous-Time Model ⋮ Hedging Under an Expected Loss Constraint with Small Transaction Costs ⋮ American contingent claims under small proportional transaction costs ⋮ NO-ARBITRAGE PRICING FOR DIVIDEND-PAYING SECURITIES IN DISCRETE-TIME MARKETS WITH TRANSACTION COSTS ⋮ Duality and convergence for binomial markets with friction ⋮ Explicit characterization of the super-replication strategy in financial markets with partial transaction costs ⋮ Hedging of game options with the presence of transaction costs ⋮ Optimal trading strategy for European options with transaction costs. ⋮ Consistent price systems and face-lifting pricing under transaction costs ⋮ The super-replication problem via probabilistic methods ⋮ Consistent price systems in multiasset markets ⋮ Pricing a contingent claim liability with transaction costs using asymptotic analysis for optimal investment ⋮ Robust hedging with proportional transaction costs ⋮ Super-replication with fixed transaction costs ⋮ Option pricing with transaction costs using a Markov chain approximation ⋮ Model-Free Price Bounds Under Dynamic Option Trading ⋮ Brownian moving averages have conditional full support ⋮ The scaling limit of superreplication prices with small transaction costs in the multivariate case ⋮ A functional Hodrick-Prescott filter ⋮ Small time path behavior of double stochastic integrals and applications to stochastic control ⋮ Continuous-time duality for superreplication with transient price impact ⋮ The Fundamental Theorem of Asset Pricing under Proportional Transaction Costs in Finite Discrete Time ⋮ American options under proportional transaction costs: pricing, hedging and stopping algorithms for long and short positions ⋮ Option replication with transaction cost under Knightian uncertainty ⋮ MULTIPLICATIVE APPROXIMATION OF WEALTH PROCESSES INVOLVING NO-SHORT-SALES STRATEGIES VIA SIMPLE TRADING ⋮ The multi-dimensional super-replication problem under gamma constraints ⋮ Price functionals with bid-ask spreads: An axiomatic approach ⋮ LIMIT THEOREMS FOR PARTIAL HEDGING UNDER TRANSACTION COSTS ⋮ On the functional Hodrick-Prescott filter with non-compact operators

Cites Work

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• The Pricing of Options and Corporate Liabilities
• Martingales and stochastic integrals in the theory of continuous trading
• There is no nontrivial hedging portfolio for option pricing with transaction costs
• DERIVATIVE ASSET PRICING WITH TRANSACTION COSTS¹
• A note on super-replicating strategies

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