There is no nontrivial hedging portfolio for option pricing with transaction costs

DOI10.1214/AOAP/1177004767zbMATH Open0837.90012OpenAlexW2068433492WikidataQ57636016 ScholiaQ57636016MaRDI QIDQ1901077FDOQ1901077

Authors: H. Mete Soner, Steven Shreve, Jakša Cvitanić 

Publication date: 12 May 1996

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

Full work available at URL: https://doi.org/10.1214/aoap/1177004767

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zbMATH Keywords

Black-Scholes modelEuropean call

Mathematics Subject Classification ID

Derivative securities (option pricing, hedging, etc.) (91G20) Applications of stochastic analysis (to PDEs, etc.) (60H30) Optimal stochastic control (93E20)

Cited In (82)

• Pricing of equity indexed annuity under fractional Brownian motion model
• Superreplication when trading at market indifference prices
• Duality and convergence for binomial markets with friction
• Portfolio Choice with Transaction Costs: A User’s Guide
• Robust hedging with proportional transaction costs
• Homogenization and Asymptotics for Small Transaction Costs: The Multidimensional Case
• Robust option pricing: Hannan and Blackwell meet Black and Scholes
• A super-replication theorem in Kabanov's model of transaction costs
• Risk preference, option pricing and portfolio hedging with proportional transaction costs
• OPTIMAL PORTFOLIO SELECTION STRATEGIES IN THE PRESENCE OF TRANSACTION COSTS
• Option replication with transaction cost under Knightian uncertainty
• On the possibility of hedging options in the presence of transaction costs
• Asymptotic replication with modified volatility under small transaction costs
• American contingent claims under small proportional transaction costs
• A guaranteed deterministic approach to superhedging: financial market model, trading constraints and Bellman-Isaacs equations
• Event risk, contingent claims and the temporal resolution of uncertainty
• Pricing a contingent claim liability with transaction costs using asymptotic analysis for optimal investment
• Convergence of a high-order compact finite difference scheme for a nonlinear Black–Scholes equation
• The European option with hereditary price structures
• Super-replication with nonlinear transaction costs and volatility uncertainty
• A pseudospectral method for option pricing with transaction costs under exponential utility
• Explicit solution to the multivariate super-replication problem under transaction costs.
• Option pricing and replication with transaction costs and dividends
• Optimal investment with transaction costs based on exponential utility function: a parabolic double obstacle problem
• THE BEST HEDGING STRATEGY IN THE PRESENCE OF TRANSACTION COSTS
• Nonlinear PDE model for European options with transaction costs under Heston stochastic volatility
• Super-replication with fixed transaction costs
• Stochastic dominance bounds on derivatives prices in a multiperiod economy with proportional transaction costs.
• On the numerical solution of nonlinear Black-Scholes equations
• Brownian moving averages have conditional full support
• Consistent price systems and face-lifting pricing under transaction costs
• Foreign currency option pricing with proportional transaction costs
• INCOMPLETE MARKETS AND SHORT-SALES CONSTRAINTS: AN EQUILIBRIUM APPROACH
• Dynamic asset pricing theory with uncertain time-horizon
• Option pricing with transaction costs using a Markov chain approximation
• Asset pricing and hedging in financial markets with transaction costs: an approach based on the von Neumann-Gale model
• Differential game-theoretic thoughts on option pricing and transaction costs
• The super-replication problem via probabilistic methods
• No arbitrage without semimartingales
• Small transaction cost asymptotics and dynamic hedging
• The true invariant of an arbitrage free portfolio
• Hedging of game options with the presence of transaction costs
• Explicit characterization of the super-replication strategy in financial markets with partial transaction costs
• Utility based option pricing with proportional transaction costs and diversification problems: An interior-point optimization approach
• Price functionals with bid-ask spreads: An axiomatic approach
• Mean-variance hedging for pricing European-type contingent claims with transaction costs.
• Hedging in fractional Black-Scholes model with transaction costs
• Continuous-time duality for superreplication with transient price impact
• Option pricing and hedging with small transaction costs
• Consistent stable difference schemes for nonlinear Black-Scholes equations modelling option pricing with transaction costs
• Hedging European and barrier options using stochastic optimization
• Fragility of arbitrage and bubbles in local martingale diffusion models
• Sublinear price functionals under portfolio constraints
• Utility based option evaluation with proportional transaction costs
• Optimal trading strategy for European options with transaction costs.
• Numerical methods applied to option pricing models with transaction costs and stochastic volatility
• Sharpe-ratio pricing and hedging of contingent claims in incomplete markets by convex programming
• Conditional dominance criteria: Definition and application to risk-management
• Deep hedging
• No-arbitrage pricing for dividend-paying securities in discrete-time markets with transaction costs
• Option hedging theory under transaction costs
• The scaling limit of superreplication prices with small transaction costs in the multivariate case
• Limit theorems for partial hedging under transaction costs
• An endogenous volatility approach to pricing and hedging call options with transaction costs
• Implicit transaction costs and the fundamental theorems of asset pricing
• VALUATION AND HEDGING OF OPTIONS WITH GENERAL PAYOFF UNDER TRANSACTIONS COSTS
• European option pricing with market frictions, regime switches and model uncertainty
• Asset pricing and hedging in financial markets with fixed and proportional transaction costs
• Hedge and speculate: replicating option payoffs with limit and market orders
• Neural network approximation for superhedging prices
• European option pricing under stochastic volatility jump-diffusion models with transaction cost
• A guaranteed deterministic approach to superhedging: financial market model, trading constraints, and the Bellman-Isaacs equations
• Hedging of two-dimensional options in presence of partial transaction costs
• Generalized optimal liquidation problems across multiple trading venues
• A two-step problem of hedging a European call option under a random duration of transactions
• Scaling limits for super-replication with transient price impact
• Hedging under an expected loss constraint with small transaction costs
• Optimal hedging strategies for multi-period guarantees in the presence of transaction costs: a stochastic programming approach
• The optimal rehedging interval for the options portfolio within the RAPM, taking into account transaction costs and liquidity costs
• General indifference pricing with small transaction costs
• Black and Scholes pricing and markets with transaction costs: An example
• On horizon-consistent mean-variance portfolio allocation

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