On option pricing in binomial market with transaction costs
The paper is devoted to the study of effects of transaction costs on option pricing in the framework of a binomial financial market. First, a binomial financial market with transaction costs and different credit and deposit rates is introduced. Self-financing conditions and contingent claims are discussed. Then, existence, uniqueness, and an explicit form of a replicating self-financing strategy are investigated. A numerical example is given to illustrate the results.
scientific article; zbMATH DE number 2169558