Optimal delta-hedging under transactions costs

DOI10.1016/S0165-1889(97)00030-4zbMath0901.90010MaRDI QIDQ1391437

Les Clewlow, Stewart D. Hodges

Publication date: 22 July 1998

Published in: Journal of Economic Dynamics \& Control (Search for Journal in Brave)

zbMATH Keywords

simulationhedgingoption pricingcomputational methodstransaction costs

Mathematics Subject Classification ID

Derivative securities (option pricing, hedging, etc.) (91G20)

Related Items (27)

Option pricing and portfolio hedging under the mixed hedging strategy ⋮ Dynamic portfolio optimization with transaction costs and state-dependent drift ⋮ Pricing European options with proportional transaction costs and stochastic volatility using a penalty approach and a finite volume scheme ⋮ Risk preference, option pricing and portfolio hedging with proportional transaction costs ⋮ Dynamic hedging of single and multi-dimensional options with transaction costs: a generalized utility maximization approach ⋮ A unified approach to portfolio optimization with linear transaction costs ⋮ Pricing a contingent claim liability with transaction costs using asymptotic analysis for optimal investment ⋮ Indifference Pricing in a Market with Transaction Costs and Jumps ⋮ PERFORMANCE OF ROBUST HEDGES FOR DIGITAL DOUBLE BARRIER OPTIONS ⋮ Small transaction cost asymptotics and dynamic hedging ⋮ Option pricing with transaction costs using a Markov chain approximation ⋮ European option pricing and hedging with both fixed and proportional transaction costs ⋮ Computation of reservation prices of options with proportional transaction costs ⋮ On reset option pricing in binomial market with both fixed and proportional transaction costs ⋮ A numerical method for pricing European options with proportional transaction costs ⋮ High-order compact scheme for solving nonlinear Black–Scholes equation with transaction cost ⋮ The optimal rehedging interval for the options portfolio within the RAPM, taking into account transaction costs and liquidity costs ⋮ THE BEST HEDGING STRATEGY IN THE PRESENCE OF TRANSACTION COSTS ⋮ Penalty approach to the HJB equation arising in European stock option pricing with proportional transaction costs ⋮ Option hedging theory under transaction costs ⋮ Utility based pricing of contingent claims in incomplete markets ⋮ Utility based option pricing with proportional transaction costs and diversification problems: An interior-point optimization approach ⋮ Option pricing under residual risk and imperfect hedging ⋮ WIENER CHAOS: A NEW APPROACH TO OPTION HEDGING ⋮ Utility based option evaluation with proportional transaction costs ⋮ Efficient analytic approximation of the optimal hedging strategy for a European call option with transaction costs ⋮ An approximate distribution of delta-hedging errors in a jump-diffusion model with discrete trading and transaction costs

Cites Work

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• The Pricing of Options and Corporate Liabilities
• Optimum consumption and portfolio rules in a continuous-time model
• A simplified treatment of the theory of optimal regulation of Brownian motion
• Super contact and related optimality conditions
• Portfolio selection with transactions costs
• Bounds on Derivative Prices in an Intertemporal Setting with Proportional Transaction Costs and Multiple Securities
• Optimal Impulse Control of Portfolios
• DERIVATIVE ASSET PRICING WITH TRANSACTION COSTS¹
• European Option Pricing with Transaction Costs
• A Diffusion Model for Optimal Portfolio Selection in the Presence of Brokerage Fees
• Option pricing: A simplified approach
• Portfolio Selection with Transaction Costs

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