Pricing of the American option in discrete time under proportional transaction costs

Marek Kociński

Mathematical Methods of Operations Research, 2001, vol. 53, issue 1, 67-88

Abstract: In the paper pricing of the American option in a discrete time financial market with proportional transaction costs is studied. Lower bound for the price of the American contingent claim is obtained. Under sufficiently small transaction costs the formula for the cost of a strategy that replicates an option is given and equivalence of replication and option prices is shown. Pricing for a special class of the American options in the Cox-Ross-Rubinstein model is also considered. Copyright Springer-Verlag Berlin Heidelberg 2001

Keywords: Key words: American option, self-financing strategy, hedging, replicating strategy, 1991 Mathematics Subject Classification: Primary 90A12; Secondary 93E20, (search for similar items in EconPapers)
Date: 2001
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1007/s001860000097 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:mathme:v:53:y:2001:i:1:p:67-88

Ordering information: This journal article can be ordered from
http://www.springer.com/economics/journal/00186

DOI: 10.1007/s001860000097

Access Statistics for this article

Mathematical Methods of Operations Research is currently edited by Oliver Stein

More articles in Mathematical Methods of Operations Research from Springer, Gesellschaft für Operations Research (GOR), Nederlands Genootschap voor Besliskunde (NGB)
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().