Explicit characterization of the super-replication strategy in financial markets with partial transaction costs

DOI10.1016/J.SPA.2006.09.010MaRDI QIDQ877726zbMATH OpenOpenAlexFDO

Authors Imen Bentahar, Bruno Bouchard

Publication date 3 May 2007

Published in Stochastic Processes and their Applications (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/math/0412247

zbMATH Keywords

hedging optionstransaction costsviscosity solutions

Mathematics Subject Classification ID

Martingales with continuous parameter (60G44) Stochastic ordinary differential equations (aspects of stochastic analysis) (60H10) Applications of stochastic analysis (to PDEs, etc.) (60H30)

Abstract: We consider a multivariate financial market with transaction costs and study the problem of finding the minimal initial capital needed to hedge, without risk, European-type contingent claims. The model is similar to the one considered in Bouchard and Touzi (2000), except that some of the assets can be exchanged freely, i.e. without paying transaction costs. In this context, we generalize the result of the above paper and prove that the value of this stochastic control problem is given by the cost of the cheapest hedging strategy in which the number of non-freely exchangeable assets is kept constant over time.

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Cites work

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• A note on super-replicating strategies
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• Hedging and liquidation under transaction costs in currency markets
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• On the possibility of hedging options in the presence of transaction costs
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• User’s guide to viscosity solutions of second order partial differential equations

Cited in

(15)

• Geometry of polar wedges in Riesz spaces and super-replication prices in incomplete financial markets
• A closed-form solution to the problem of super-replication under transaction costs
• Super-replication with fixed transaction costs
• Super-replication under proportional transaction costs: From discrete to continuous-time models
• Explicit solution to the multivariate super-replication problem under transaction costs.
• Dual representation of superhedging costs in illiquid markets
• Continuous-time duality for superreplication with transient price impact
• Consistent price systems and face-lifting pricing under transaction costs
• Dynamic programming principle and computable prices in financial market models with transaction costs
• On the super-replicating approach when trading a derivative is limited
• THE LEAST COST SUPER REPLICATING PORTFOLIO IN THE BOYLE–VORST MODEL WITH TRANSACTION COSTS
• scientific article; zbMATH DE number 2162736 (Why is no real title available?)
• A note on super-replicating strategies
• The super-replication theorem under proportional transaction costs revisited
• Super‐replication with transaction costs under model uncertainty for continuous processes

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