September 2016 Risk minimization for game options in markets imposing minimal transaction costs
Yan Dolinsky, Yuri Kifer
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Adv. in Appl. Probab. 48(3): 926-946 (September 2016).

Abstract

We study partial hedging for game options in markets with transaction costs bounded from below. More precisely, we assume that the investor's transaction costs for each trade are the maximum between proportional transaction costs and a fixed transaction cost. We prove that in the continuous-time Black‒Scholes (BS) model, there exists a trading strategy which minimizes the shortfall risk. Furthermore, we use binomial models in order to provide numerical schemes for the calculation of the shortfall risk and the corresponding optimal portfolio in the BS model.

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Yan Dolinsky. Yuri Kifer. "Risk minimization for game options in markets imposing minimal transaction costs." Adv. in Appl. Probab. 48 (3) 926 - 946, September 2016.

Information

Published: September 2016
First available in Project Euclid: 19 September 2016

zbMATH: 1380.91129
MathSciNet: MR3568898

Subjects:
Primary: 91G10 , 91G20
Secondary: 60F15 , 60G40 , 60G44

Keywords: Game option , hedging with friction , risk minimization , transaction cost

Rights: Copyright © 2016 Applied Probability Trust

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Vol.48 • No. 3 • September 2016
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