Option replication with transaction costs: general diffusion limits

DOI10.1214/aoap/1028903447zbMath0934.91024OpenAlexW2031097536MaRDI QIDQ1296601

Mohit Dayal, Hyungsok Ahn, G. H. Swindle, E. R. Grannan

Publication date: 23 November 1999

Published in: The Annals of Applied Probability (Search for Journal in Brave)

Full work available at URL: https://doi.org/10.1214/aoap/1028903447

zbMATH Keywords

transaction costshedging strategiesdiffusion limitsreplication errorsstock price strategies

Mathematics Subject Classification ID

Applications of stochastic analysis (to PDEs, etc.) (60H30) Martingales with continuous parameter (60G44) Derivative securities (option pricing, hedging, etc.) (91G20)

Related Items (7)

APPROXIMATE HEDGING PROBLEM WITH TRANSACTION COSTS IN STOCHASTIC VOLATILITY MARKETS ⋮ Asymptotic replication with modified volatility under small transaction costs ⋮ Approximate Hedging with Constant Proportional Transaction Costs in Financial Markets with Jumps ⋮ Limit theorem for Leland's strategy ⋮ An endogenous volatility approach to pricing and hedging call options with transaction costs ⋮ A note on convergence of an approximate hedging portfolio with liquidity risk ⋮ EVALUATING HEDGING ERRORS: AN ASYMPTOTIC APPROACH

Cites Work

• The Pricing of Options and Corporate Liabilities
• Optimum consumption and portfolio rules in a continuous-time model
• MINIMIZING TRANSACTION COSTS OF OPTION HEDGING STRATEGIES
• DERIVATIVE ASSET PRICING WITH TRANSACTION COSTS¹
• European Option Pricing with Transaction Costs
• Option pricing: A simplified approach
• Portfolio Selection with Transaction Costs
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