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2005 On the Hedging of American Options in Discrete Time with Proportional Transaction Costs
Bruno Bouchard, Emmanuel Teman
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Electron. J. Probab. 10: 746-760 (2005). DOI: 10.1214/EJP.v10-266

Abstract

In this note, we consider a general discrete time financial market with proportional transaction costs as in Kabanov and Stricker (2001), Kabanov et al. (2002), Kabanov et al. (2003) and Schachermayer (2004). We provide a dual formulation for the set of initial endowments which allow to super-hedge some American claim. We show that this extends the result of Chalasani and Jha (2001) which was obtained in a model with constant transaction costs and risky assets which evolve on a finite dimensional tree. We also provide fairly general conditions under which the expected formulation in terms of stopping times does not work.

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Bruno Bouchard. Emmanuel Teman. "On the Hedging of American Options in Discrete Time with Proportional Transaction Costs." Electron. J. Probab. 10 746 - 760, 2005. https://doi.org/10.1214/EJP.v10-266

Information

Accepted: 14 July 2005; Published: 2005
First available in Project Euclid: 1 June 2016

zbMATH: 1119.91042
MathSciNet: MR2164029
Digital Object Identifier: 10.1214/EJP.v10-266

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