Finance and Stochastics

, Volume 3, Issue 2, pp 237–248

Hedging and liquidation under transaction costs in currency markets

  • Y.M. Kabanov

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 

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Copyright information

© Springer-Verlag Berlin Heidelberg 1999

Authors and Affiliations

  • Y.M. Kabanov
    • 1
  1. 1. Laboratoire de Mathématiques, Université de Franche-Comté, 16 Route de Gray, F-25030 Besançon Cedex, France FR
  2. 2. Central Economics and Mathematics Institute of the Russian Academy of Sciences, Moscow RU

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