On option pricing in binomial market with transaction costs
نویسندگان
چکیده
Option replication is studied in a discrete-time framework with proportional transaction costs. The model represents an extension of the Cox-RossRubinstein binomial option-pricing model to cover the case of proportional transaction costs for one risky asset with different interest rates on bank credit and deposit. Contingent claims are supposed to be 2-dimensional random variables. Explicit formulas for self-financing strategies are obtained for this case.
منابع مشابه
A counter-example to an option pricing formula under transaction costs
In the paper by Melnikov and Petrachenko ‘On option pricing in binomial market with transaction costs,’ Finance Stoch. 9 (2005), 141–149, a procedure is put forward for pricing and replicating an arbitrary European contingent claim in the binomial model with bid-ask spreads. We present a counter-example to show that the option pricing formula stated in that paper can in fact lead to arbitrage. ...
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ورودعنوان ژورنال:
- Finance and Stochastics
دوره 9 شماره
صفحات -
تاریخ انتشار 2005