On the fractional Black-Scholes market with transaction costs

Ehsan Azmoodeh

Papers from arXiv.org

Abstract: We consider fractional Black-Scholes market with proportional transaction costs. When transaction costs are present, one trades periodically i.e. we have the discrete trading with equidistance $n^{-1}$ between trading times. We derive a non trivial hedging error for a class of European options with convex payoff in the case when the transaction costs coefficients decrease as $n^{-(1-H)}$. We study the expected hedging error and asymptotic behavior of the hedge as $H \to 1/2$

Date: 2010-05
New Economics Papers: this item is included in nep-rmg
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