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

DOI10.1214/AOAP/1177004767MaRDI QIDQ1901077zbMATH OpenOpenAlexWikidataFDO

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

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)

Recommendations

• On the possibility of hedging options in the presence of transaction costs
• Hedging of the European option in discrete time under proportional transaction costs
• Optimal hedging of options with small but arbitrary transaction cost structure
• Hedging of American options under transaction costs
• European option pricing and hedging with both fixed and proportional transaction costs

Cited in

(82)

• Limit theorems for partial hedging under transaction costs
• 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
• An endogenous volatility approach to pricing and hedging call options with transaction costs
• Robust hedging with proportional transaction costs
• Portfolio Choice with Transaction Costs: A User’s Guide
• Homogenization and Asymptotics for Small Transaction Costs: The Multidimensional Case
• 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
• 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
• Asset pricing and hedging in financial markets with fixed and proportional transaction costs
• Hedge and speculate: replicating option payoffs with limit and market orders
• Asymptotic replication with modified volatility under small transaction costs
• Option replication with transaction cost under Knightian uncertainty
• On the possibility of hedging options in the presence of transaction costs
• American contingent claims under small proportional transaction costs
• OPTIMAL PORTFOLIO SELECTION STRATEGIES IN THE PRESENCE OF TRANSACTION COSTS
• Pricing a contingent claim liability with transaction costs using asymptotic analysis for optimal investment
• Event risk, contingent claims and the temporal resolution of uncertainty
• A guaranteed deterministic approach to superhedging: financial market model, trading constraints and Bellman-Isaacs equations
• The European option with hereditary price structures
• Super-replication with nonlinear transaction costs and volatility uncertainty
• Convergence of a high-order compact finite difference scheme for a nonlinear Black–Scholes equation
• Neural network approximation for superhedging prices
• A pseudospectral method for option pricing with transaction costs under exponential utility
• Option pricing and replication with transaction costs and dividends
• Explicit solution to the multivariate super-replication problem under transaction costs.
• Optimal investment with transaction costs based on exponential utility function: a parabolic double obstacle problem
• Nonlinear PDE model for European options with transaction costs under Heston stochastic volatility
• THE BEST HEDGING STRATEGY IN THE PRESENCE OF TRANSACTION COSTS
• 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
• Super-replication with fixed transaction costs
• Hedging of two-dimensional options in presence of partial 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
• Foreign currency option pricing with proportional transaction costs
• Consistent price systems and face-lifting pricing under transaction costs
• Dynamic asset pricing theory with uncertain time-horizon
• INCOMPLETE MARKETS AND SHORT-SALES CONSTRAINTS: AN EQUILIBRIUM APPROACH
• 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
• Generalized optimal liquidation problems across multiple trading venues
• Differential game-theoretic thoughts on option pricing and transaction costs
• The super-replication problem via probabilistic methods
• No arbitrage without semimartingales
• 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
• Small transaction cost asymptotics and dynamic hedging
• Hedging of game options with the presence of transaction costs
• The true invariant of an arbitrage free portfolio
• Hedging under an expected loss constraint with small 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.
• Optimal hedging strategies for multi-period guarantees in the presence of transaction costs: a stochastic programming approach
• 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.
• The optimal rehedging interval for the options portfolio within the RAPM, taking into account transaction costs and liquidity costs
• Numerical methods applied to option pricing models with transaction costs and stochastic volatility
• General indifference pricing with small transaction costs
• Black and Scholes pricing and markets with transaction costs: An example
• Sharpe-ratio pricing and hedging of contingent claims in incomplete markets by convex programming
• Conditional dominance criteria: Definition and application to risk-management
• Option hedging theory under transaction costs
• No-arbitrage pricing for dividend-paying securities in discrete-time markets with transaction costs
• On horizon-consistent mean-variance portfolio allocation
• Deep hedging
• The scaling limit of superreplication prices with small transaction costs in the multivariate case

This page was built for publication: There is no nontrivial hedging portfolio for option pricing with transaction costs

Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q1901077)