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

Marek Kociński ()

Mathematical Methods of Operations Research, 2004, vol. 59, issue 2, 315-328

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. Copyright Springer-Verlag 2004

Keywords: European option; Self-financing strategy; Hedging; Transaction costs (search for similar items in EconPapers)
Date: 2004
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Persistent link: https://EconPapers.repec.org/RePEc:spr:mathme:v:59:y:2004:i:2:p:315-328

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DOI: 10.1007/s001860300323

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