Option Pricing via Utility Maximization in the Presence of Transaction Costs : an Asymptotic Analysis
نویسنده
چکیده
We consider a multivariate nancial market with proportional transaction costs as in Kabanov (1999). We study the problem of contingent claim pricing via utility max-imization as in Hodges and Neuberger (1989). Using an exponential utility function, we derive a closed form characterization for the asymptotic price as the risk aversion tends to innnity. We prove that it is reduced to the super-replication cost if the initial endowment is only invested in the non-risky asset, as it was conjectured in Barles and Soner (1996). We do not make use of the dual formulation for the super-replication price obtained in Kabanov (1999). I am grateful to Professor Nizar Touzi for a careful reading of this paper which considerably improved its presentation.
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Efficient option pricing with transaction costs
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