Super-replication with fixed transaction costs
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Abstract: We study super--replication of contingent claims in markets with fixed transaction costs. This can be viewed as a stochastic impulse control problem with a terminal state constraint. The first result in this paper reveals that in reasonable continuous time financial market models the super--replication price is prohibitively costly and leads to trivial buy--and--hold strategies. Our second result derives nontrivial scaling limits of super--replication prices for binomial models with small fixed costs.
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- Explicit characterization of the super-replication strategy in financial markets with partial transaction costs
Cites work
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Cited in
(13)- Direct characterization of the value of super-replication under stochastic volatility and portfolio constraints.
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- Explicit characterization of the super-replication strategy in financial markets with partial transaction costs
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- The scaling limit of superreplication prices with small transaction costs in the multivariate case
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