Option pricing in the CRR model with proportional transaction costs: a cone transformation approach

Ł. Stettner

Applicationes Mathematicae (1997)

  • Volume: 24, Issue: 4, page 475-514
  • ISSN: 1233-7234

Abstract

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Option pricing in the Cox-Ross-Rubinstein model with transaction costs is studied. Using a cone transformation approach a complete characterization of perfectly hedged options is given.

How to cite

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Stettner, Ł.. "Option pricing in the CRR model with proportional transaction costs: a cone transformation approach." Applicationes Mathematicae 24.4 (1997): 475-514. <http://eudml.org/doc/219187>.

@article{Stettner1997,
abstract = {Option pricing in the Cox-Ross-Rubinstein model with transaction costs is studied. Using a cone transformation approach a complete characterization of perfectly hedged options is given.},
author = {Stettner, Ł.},
journal = {Applicationes Mathematicae},
keywords = {transaction costs; replicating cost; binomial model; hedging; option; Cox-Cross-Rubinstein model; perfectly hedged options},
language = {eng},
number = {4},
pages = {475-514},
title = {Option pricing in the CRR model with proportional transaction costs: a cone transformation approach},
url = {http://eudml.org/doc/219187},
volume = {24},
year = {1997},
}

TY - JOUR
AU - Stettner, Ł.
TI - Option pricing in the CRR model with proportional transaction costs: a cone transformation approach
JO - Applicationes Mathematicae
PY - 1997
VL - 24
IS - 4
SP - 475
EP - 514
AB - Option pricing in the Cox-Ross-Rubinstein model with transaction costs is studied. Using a cone transformation approach a complete characterization of perfectly hedged options is given.
LA - eng
KW - transaction costs; replicating cost; binomial model; hedging; option; Cox-Cross-Rubinstein model; perfectly hedged options
UR - http://eudml.org/doc/219187
ER -

References

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  1. [BLPS] B. Bensaid, J. P. Lesne, H. Pagès and J. Scheinkman, Derivative asset pricing with transaction costs, Math. Finance 2 (1992), 63-83. Zbl0900.90100
  2. [BV] P. P. Boyle and T. Vorst, Option replication in discrete time with transaction costs, J. Finance 47 (1992), 271-293. 
  3. [CRR] J. C. Cox, S. A. Ross and M. Rubinstein, Option pricing: A simplified approach, J. Financial Econom. 7 (1979), 229-263. Zbl1131.91333
  4. [CK] J. Cvitanić and I. Karatzas, Hedging and portfolio optimization under transaction costs: A martingale approach, Math. Finance 6 (1996), 133-165. Zbl0919.90007
  5. [DC] M. H. A. Davis and J. M. C. Clark, A note on super-replicating strategies, Philos. Trans. Roy. Soc. London Ser. A 347 (1994), 485-494. Zbl0822.90020
  6. [ENU] C. Edirisinghe, V. Naik and R. Uppal, Optimal replication with transaction costs and trading restrictions, J. Financial Quant. Anal. 28 (1993), 117-138. 
  7. [MV] F. Mercurio and T. C. F. Vorst, Option pricing and hedging in discrete time with transaction costs and incomplete markets, preprint. Zbl0947.91038
  8. [MS] M. Motoczyński and Ł. Stettner, On option pricing in the multidimensional Cox-Ross-Rubinstein model, Appl. Math. (Warsaw), to appear. Zbl0895.90016
  9. [R] M. Rutkowski, Optimality of replicating strategies in the CCR model with proportional transaction costs, ibid., to appear. 
  10. [SSC] H. M. Soner, S. E. Schreve and J. Cvitanić, There is no nontrivial portfolio for option pricing with transaction costs, Ann. Appl. Probab. 5 (1995), 327-355. Zbl0837.90012
  11. [SKKM] I. Shiryaev, Yu. M. Kabanov, D. O. Kramkov and A. V. Melnikov, On the theory of pricing of European and American options, I: Discrete time, Teor. Veroyatnost. i Primenen. 39 (1994), 23-79 (in Russian). Zbl0833.60064
  12. [TZ] G. Tessitore and J. Zabczyk, Pricing options for multinomial models, Bull. Polish Acad. Sci. Math. 44 (1996), 363-380. Zbl0868.90010

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