Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/61301
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dc.contributor.authorLamberton, Damienen_US
dc.contributor.authorPham, Huyênen_US
dc.contributor.authorSchweizer, Martinen_US
dc.date.accessioned2012-08-24T13:47:18Z-
dc.date.available2012-08-24T13:47:18Z-
dc.date.issued1998en_US
dc.identifier.piurn:nbn:de:kobv:11-10056588en_US
dc.identifier.urihttp://hdl.handle.net/10419/61301-
dc.description.abstractWe propose a new approach to the pricing and hedging of contingent claims under transaction costs in a general incomplete market in discrete time. Under the assumptions of a bounded mean-variance tradeoff, substantial risk and a nondegeneracy condition on the conditional variances of asset returns, we prove the existence of a locally risk-minimizing strategy inclusive of transaction costs for every square-integrable contingent claim. Then we show that local riskminimization is robust under the inclusion of transaction costs: The preceding strategy which is locally risk-minimizing inclusive of transaction costs in a model with bid-ask spreads on the underlying asset is also locally risk-minimizing without transaction costs in a fictitious model which is frictionless and where the fictitious asset price lies between the bid and ask price processes of the original model. In particular, our results apply to any nondegenerate model with a finite state space if the transaction cost parameter is sufficiently small.en_US
dc.language.isoengen_US
dc.publisher|aHumboldt-Universität |cBerlinen_US
dc.relation.ispartofseries|aDiscussion Papers, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes |x1998,18en_US
dc.subject.jelG10en_US
dc.subject.jelC60en_US
dc.subject.ddc330en_US
dc.subject.keywordoption pricingen_US
dc.subject.keywordhedgingen_US
dc.subject.keywordtransaction costsen_US
dc.subject.keywordlocally risk-minimizing strategiesen_US
dc.subject.keywordmean-variance tradeoffen_US
dc.titleLocal risk-minimization under transaction costsen_US
dc.typeWorking Paperen_US
dc.identifier.ppn721438024en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen_US
dc.identifier.repecRePEc:zbw:sfb373:199818-

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