The problem of hedging a contingent claim with minimization of quadratic risk is studied. Existence of an optimal strategy for the model with proportional transaction cost and nondelayed observation is shown.
Option pricing in the multidimensional case, i.e. when the contingent claim paid at maturity depends on a number of risky assets, is considered. It is assumed that the prices of the risky assets are in discrete time subject to binomial disturbances. Two approaches to option pricing are studied: geometric and analytic. A numerical example is also given.
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