The scaling limit of superreplication prices with small transaction costs in the multivariate case

DOI10.1007/S00780-016-0320-4zbMATH Open1378.91132arXiv1510.04537OpenAlexW2266883433MaRDI QIDQ522060FDOQ522060

Authors: Yan Dolinsky, Ari-Pekka Perkkiö, Peter Bank 

Publication date: 13 April 2017

Published in: Finance and Stochastics (Search for Journal in Brave)

Abstract: Kusuoka [ Limit Theorem on Option Replication Cost with Transaction Costs, Ann. Appl. Probab. 5, 198--221, (1995).] showed how to obtain non-trivial scaling limits of superreplication prices in discrete-time models of a single risky asset which is traded at properly scaled proportional transaction costs. This article extends the result to a multi-variate setup where the investor can trade in several risky assets. The $G$-expectation describing the limiting price involves models with a volatility range around the frictionless scaling limit that depends not only on the transaction costs coefficients but also on the chosen complete discrete-time reference model.

Full work available at URL: https://arxiv.org/abs/1510.04537

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zbMATH Keywords

convolutionLie groupsprobability measure

Mathematics Subject Classification ID

Derivative securities (option pricing, hedging, etc.) (91G20) Central limit and other weak theorems (60F05) Portfolio theory (91G10) Functional limit theorems; invariance principles (60F17) Applications of stochastic analysis (to PDEs, etc.) (60H30) Actuarial science and mathematical finance (91G99)

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Cited In (9)

• Scaling limits of processes with fast nonlinear mean reversion
• Option replication with transaction cost under Knightian uncertainty
• On the limit behavior of option hedging sets under transaction costs
• On a multi-asset version of the Kusuoka limit theorem of option superreplication under transaction costs
• Super-replication with fixed transaction costs
• Scaling limits for super-replication with transient price impact
• Limit theorem on option replication cost with transaction costs
• Market delay and \(G\)-expectations
• Convergence of utility indifference prices to the superreplication price: the whole real line case

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