American and Bermudan options in currency markets with proportional transaction costs

DOI10.1007/S10440-015-0010-9MaRDI QIDQ267772zbMATH OpenOpenAlexFDO

Authors Alet Roux, Tomasz Zastawniak

Publication date 11 April 2016

Published in Acta Applicandae Mathematicae (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1108.1910

zbMATH Keywords

optimal stoppingAmerican optionscurrenciesproportional transaction costs

Mathematics Subject Classification ID

Derivative securities (option pricing, hedging, etc.) (91G20) Numerical methods (including Monte Carlo methods) (91G60) Stopping times; optimal stopping problems; gambling theory (60G40)

Abstract: The pricing and hedging of a general class of options (including American, Bermudan and European options) on multiple assets are studied in the context of currency markets where trading is subject to proportional transaction costs, and where the existence of a risk-free num'eraire is not assumed. Constructions leading to algorithms for computing the prices, optimal hedging strategies and stopping times are presented for both long and short option positions in this setting, together with probabilistic (martingale) representations for the option prices.

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Cites work

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Cited in

(11)

• SENSITIVITIES AND HEDGING OF THE COLLATERAL CHOICE OPTION
• American options under proportional transaction costs: pricing, hedging and stopping algorithms for long and short positions
• Optimal investment and contingent claim valuation with exponential disutility under proportional transaction costs
• Optimal discrete hedging of American options using an integrated approach to options with complex embedded decisions
• Game options with gradual exercise and cancellation under proportional transaction costs
• Pricing and hedging game options in currency models with proportional transaction costs
• A recursive algorithm for multivariate risk measures and a set-valued Bellman's principle
• scientific article; zbMATH DE number 1795854 (Why is no real title available?)
• Time consistency for scalar multivariate risk measures
• Von Neumann–Gale model, market frictions and capital growth
• Scalar multivariate risk measures with a single eligible asset

Describes a project that uses

Uses Software

• Convex

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