A closed-form solution to the problem of super-replication under transaction costs

We study the problem of nding the minimal price needed to dominate European-type contingent claims under proportional transaction costs in a continuous-time diiu-sion model. The result we prove has already been known in special cases-the minimal super-replicating strategy is the least expensive buy-and-hold strategy. Our contribution consists in showing that this result remains valid for general path-independent claims, and in providing a shorter and more intuitive, nancial mathematics-type proof. It is based on a previously known representation of the minimal price as a supremum of the prices in corresponding shadow markets, and on a PDE (viscosity) characterization of that representation.