Approximate Hedging in a Local Volatility Model with Proportional Transaction Costs

DOI10.1080/1350486X.2013.871802zbMath1395.91455OpenAlexW1983031128MaRDI QIDQ4586034

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Publication date: 11 September 2018

Published in: Applied Mathematical Finance (Search for Journal in Brave)

Full work available at URL: https://doi.org/10.1080/1350486x.2013.871802

zbMATH Keywords

transaction costslocal volatilityapproximate hedgingLeland's strategy

Mathematics Subject Classification ID

Derivative securities (option pricing, hedging, etc.) (91G20) PDEs in connection with game theory, economics, social and behavioral sciences (35Q91)

Related Items (3)

Hedging Problem for Asian Call Options with Transaction Costs ⋮ Approximate Hedging with Constant Proportional Transaction Costs in Financial Markets with Jumps ⋮ Diffusion Equations: Convergence of the Functional Scheme Derived from the Binomial Tree with Local Volatility for Non Smooth Payoff Functions

Cites Work

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• Propagation of convexity by Markovian and martingalian semigroups
• Limit theorem for Leland's strategy
• Convexity of solutions of parabolic equations
• Approximate Hedging of Contingent Claims under Transaction Costs for General Pay-offs
• Uniqueness, stability and numerical methods for the inverse problem that arises in financial markets
• MODIFIED LELAND’S STRATEGY FOR A CONSTANT TRANSACTION COSTS RATE
• On decoupling of volatility smile and term structure in inverse option pricing

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