Limit theorem for Leland's strategy

DOI10.1214/aoap/1060202836zbMath1091.91039OpenAlexW2004164071MaRDI QIDQ1425487

Serguei Pergamenchtchikov

Publication date: 21 March 2004

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

Full work available at URL: https://doi.org/10.1214/aoap/1060202836

zbMATH Keywords

transaction costsBlack-Scholes formulacall optionasymptotic hedgingLeland's strategy

Mathematics Subject Classification ID

Derivative securities (option pricing, hedging, etc.) (91G20) Stochastic integrals (60H05)

Related Items (16)

APPROXIMATE HEDGING PROBLEM WITH TRANSACTION COSTS IN STOCHASTIC VOLATILITY MARKETS ⋮ CALCULATION OF ASIAN OPTIONS FOR THE BLACK–SCHOLES MODEL ⋮ COHERENT RISK MEASURE ON L0: NA CONDITION, PRICING AND DUAL REPRESENTATION ⋮ Mean Square Error and Limit Theorem for the Modified Leland Hedging Strategy with a Constant Transaction Costs Coefficient ⋮ Risk preference, option pricing and portfolio hedging with proportional transaction costs ⋮ Approximate Hedging in a Local Volatility Model with Proportional Transaction Costs ⋮ Hedging Problem for Asian Call Options with Transaction Costs ⋮ Approximate Hedging with Constant Proportional Transaction Costs in Financial Markets with Jumps ⋮ Mean square error for the Leland-Lott hedging strategy: convex pay-offs ⋮ Super-replication with fixed transaction costs ⋮ THE TRACKING ERROR RATE OF THE DELTA‐GAMMA HEDGING STRATEGY ⋮ MODIFIED LELAND’S STRATEGY FOR A CONSTANT TRANSACTION COSTS RATE ⋮ Approximate Hedging of Contingent Claims under Transaction Costs for General Pay-offs ⋮ EVALUATING HEDGING ERRORS: AN ASYMPTOTIC APPROACH ⋮ Approximate hedging for nonlinear transaction costs on the volume of traded assets ⋮ How fast does it diverge? Discrete hedging error with transaction costs

Cites Work

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• The Pricing of Options and Corporate Liabilities
• On Leland's strategy of option pricing with transactions costs
• Option replication with transaction costs: general diffusion limits
• Limit theorem on option replication cost with transaction costs
• Quantile hedging
• Leland's Approach to Option Pricing: The Evolution of a Discontinuity

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