Advances in Applied Probability
- Adv. in Appl. Probab.
- Volume 48, Number 3 (2016), 926-946.
Risk minimization for game options in markets imposing minimal transaction costs
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.
Adv. in Appl. Probab., Volume 48, Number 3 (2016), 926-946.
First available in Project Euclid: 19 September 2016
Permanent link to this document
Mathematical Reviews number (MathSciNet)
Zentralblatt MATH identifier
Primary: 91G10: Portfolio theory 91G20: Derivative securities
Secondary: 60F15: Strong theorems 60G40: Stopping times; optimal stopping problems; gambling theory [See also 62L15, 91A60] 60G44: Martingales with continuous parameter
Dolinsky, Yan; Kifer, Yuri. Risk minimization for game options in markets imposing minimal transaction costs. Adv. in Appl. Probab. 48 (2016), no. 3, 926--946. https://projecteuclid.org/euclid.aap/1474296321