The DOI matches its Crossref record; 1 of the 1 references it cites were found in a registry or an index.
There is no Nontrivial Hedging Portfolio for Option Pricing with Transaction Costs
Open accessAbstract
Conventional wisdom holds that since continuous-time, Black-Scholes hedging is infinitely expensive in a model with proportional transaction costs, there is no continuous-time strategy which hedges a European call option perfectly. Of course, if one is attempting to dominate the European call rather than replicate it, then one can use the trivial strategy of buying one share of the underlying stock and holding to maturity. In this paper we prove that this is, in fact, the least expensive method of dominating a European call in a Black-Scholes model with proportional transaction costs.
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Citations
Cites
The pricing of options and corporate liabilities
Black, F., & Scholes, M. (1973) · Journal of Political Economy · doi:10.1086/260062 · Cited by 29,074
Cited by
Markowitz Revisited: Mean-Variance Models in Financial Portfolio Analysis
Steinbach, M. C. (2001) · SIAM Review · doi:10.1137/s0036144500376650 · Cited by 382
Buehler, H., Gonon, L., Teichmann, J., & Wood, B. (2019) · Quantitative Finance · doi:10.1080/14697688.2019.1571683 · Cited by 333
HEDGING AND PORTFOLIO OPTIMIZATION UNDER TRANSACTION COSTS: A MARTINGALE APPROACH12
Cvitanić, J., & Karatzas, I. (1996) · Mathematical Finance · doi:10.1111/j.1467-9965.1996.tb00075.x · Cited by 317
Deep Hedging: Hedging Derivatives Under Generic Market Frictions Using Reinforcement Learning
Buehler, H., Gonon, L., Teichmann, J., Wood, B., Mohan, B., & Kochems, J. (2019) · doi:10.2139/ssrn.3355706 · Cited by 48
Metadata
- Authors
- Soner, H. M., Shreve, S. E., & Cvitanic, J.
- Venue
- The Annals of Applied Probability
- Publisher
- Institute of Mathematical Statistics
- Published
- 1995-05-01
- Volume
- 5
- Issue
- 2
- Pages
- 327-355
- ISSN
- 1050-5164 (ISSN-L)
- OpenAlex
- W2068433492
- Cited by
- 286
- References
- 1
- FWCI
- 11.39
- Type
- journal article
- Language
- en
- Open access
- bronze
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- Soner, H. M., Shreve, S. E., & Cvitanic, J. (1995). There is no Nontrivial Hedging Portfolio for Option Pricing with Transaction Costs. The Annals of Applied Probability. https://doi.org/10.1214/aoap/1177004767
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Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
Semantic Scholar’s data is described in: Kinney, R., et al. (2023). The Semantic Scholar Open Data Platform. arXiv:2301.10140.
