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Hedging and liquidation under transaction costs in currency markets

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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.

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Authors and Affiliations

  1. Laboratoire de Mathématiques, Université de Franche-Comté, 16 Route de Gray, F-25030 Besançon Cedex, France , , , , , , FR

    Y.M. Kabanov

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  1. Y.M. Kabanov
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Manuscript received: December 1996; final version received: June 1998

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Kabanov, Y. Hedging and liquidation under transaction costs in currency markets. Finance Stochast 3, 237–248 (1999). https://doi.org/10.1007/s007800050061

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  • DOI: https://doi.org/10.1007/s007800050061

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