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Hedging of the European option in discrete time under proportional transaction costs

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Abstract.

In the paper hedging of the European option in a discrete time financial market with proportional transaction costs is studied. It is shown that for a certain class of options the set of portfolios which allow to hedge an option in a discrete time model with a bounded set of possible changes in a stock price is the same as the set of such portfolios, under assumption that the stock price evolution is given by a suitable CRR model.

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  1. Katedra Ekonometrii i Informatyki, Wydział Ekonomiczno-Rolniczy, Szkoła Główna Gospodarstwa Wiejskiego ul, Nowoursynowska 166,, 02-787, Warszawa, Poland

    Marek Kociński

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  1. Marek Kociński
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Correspondence to Marek Kociński.

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Kociński, M. Hedging of the European option in discrete time under proportional transaction costs. Math Meth Oper Res 59, 315–328 (2004). https://doi.org/10.1007/s001860300323

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  • DOI: https://doi.org/10.1007/s001860300323

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