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Discrete time arbitrage under transaction costs

100%

Piasecka J.

Applicationes Mathematicae

2000

tom 27

nr 4

419-436

Conditions for the absence of arbitrage in discrete time markets with various kinds of transaction costs are shown.

Optimality of replication in the CRR model with transaction costs

80%

Rutkowski M.

Applicationes Mathematicae

1998-1999

tom 25

nr 1

29-53

Recently, there has been a growing interest in optimization problems associated with the arbitrage pricing of derivative securities in imperfect markets (in particular, in models with transaction costs). In this paper, we examine the valuation and hedging of European claims in the multiplicative binomial model proposed by Cox, Ross and Rubinstein [5] (the CRR model), in the presence of proportional transaction costs. We focus on the optimality of replication; in particular, we provide sufficient conditions for the optimality of the replicating strategy in the case of long and short positions in European options. This work can be seen as a continuation of studies by Bensaid et al. [2] and Edirisinghe et al. [13]. We put, however, more emphasis on the martingale approach to the claims valuation in the presence of transaction costs, focusing on call and put options. The problem of optimality of replication in the CRR model under proportional transaction costs was recently solved in all generality by Stettner[30].

Ograniczanie wyników

2 Applicationes Mathematicae

1 Piasecka J.

1 Rutkowski M.

1 2000

1 1998

Wyniki wyszukiwania

Discrete time arbitrage under transaction costs

Optimality of replication in the CRR model with transaction costs