Hedging in fractional Black–Scholes model with transaction costs

Foad Shokrollahi and Tommi Sottinen

Statistics & Probability Letters, 2017, vol. 130, issue C, 85-91

Abstract: We consider conditional-mean hedging in a fractional Black–Scholes pricing model in the presence of proportional transaction costs. We develop an explicit formula for the conditional-mean hedging portfolio in terms of the recently discovered explicit conditional law of the fractional Brownian motion.

Keywords: Delta-hedging; Fractional Black–Scholes model; Transaction costs; Option pricing (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (4)

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DOI: 10.1016/j.spl.2017.07.014

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