Finance and Stochastics

, Volume 3, Issue 2, pp 237–248

Hedging and liquidation under transaction costs in currency markets

Authors

  • Y.M. Kabanov
    • Laboratoire de Mathématiques, Université de Franche-Comté, 16 Route de Gray, F-25030 Besançon Cedex, France

DOI: 10.1007/s007800050061

Cite this article as:
Kabanov, Y. Finance Stochast (1999) 3: 237. doi:10.1007/s007800050061

Abstract.

We consider a general semimartingale model of a currency market with transaction costs and give a description of the initial endowments which allow to hedge a contingent claim in various currencies by a self-financing portfolio. As an application we obtain a result on the structure of optimal strategies for the problem of maximizing expected utility from terminal wealth.

Key words: Currency market, contingent claim, transaction cost, hedging JEL classification: G13, G11 Mathematics Subject Classification (1991): 60G44

Copyright information

© Springer-Verlag Berlin Heidelberg 1999