
Open access
Date
2014-04Type
- Journal Article
Citations
Cited 40 times in
Web of Science
Cited null times in
Scopus
ETH Bibliography
yes
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Abstract
A duality for robust hedging with proportional transaction costs of path-dependent European options is obtained in a discrete-time financial market with one risky asset. The investor’s portfolio consists of a dynamically traded stock and a static position in vanilla options, which can be exercised at maturity. Trading of both options and stock is subject to proportional transaction costs. The main theorem is a duality between hedging and a Monge–Kantorovich-type optimization problem. In this dual transport problem, the optimization is over all probability measures that satisfy an approximate martingale condition related to consistent price systems, in addition to an approximate marginal constraint. Show more
Permanent link
https://doi.org/10.3929/ethz-b-000075737Publication status
publishedExternal links
Journal / series
Finance and StochasticsVolume
Pages / Article No.
Publisher
SpringerSubject
European options; Robust hedging; Transaction costs; Weak convergence; Consistent price systems; Optimal transportOrganisational unit
03658 - Schweizer, Martin / Schweizer, Martin
03844 - Soner, Mete (emeritus) / Soner, Mete (emeritus)
Notes
It was possible to publish this article open access thanks to a Swiss National Licence with the publisher.More
Show all metadata
Citations
Cited 40 times in
Web of Science
Cited null times in
Scopus
ETH Bibliography
yes
Altmetrics