Hedging of the European option in discrete time under transaction costs depending on time
Volume 37 / 2010
Applicationes Mathematicae 37 (2010), 201-214
MSC: Primary 91B24; Secondary 91G20.
DOI: 10.4064/am37-2-5
Abstract
Hedging of the European option in a discrete time financial market with proportional transaction costs is considered. It is shown that for a certain class of options the set of portfolios which allow the seller to pay the claim of the buyer in quite a general discrete time market model is the same as the set of such portfolios under the assumption that the stock price movement is given by a suitable CRR model.
