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Journal Articles Stochastic Processes and their Applications Year : 2007

Explicit characterization of the super-replication strategy in financial markets with partial transaction costs

Abstract

We consider a multivariate financial market with transaction costs and study the problem of finding the minimal initial capital needed to hedge, without risk, European-type contingent claims. The model is similar to the one considered in Bouchard and Touzi (2000), except that some of the assets can be exchanged freely, i.e. without paying transaction costs. In this context, we generalize the result of the above paper and prove that the value of this stochastic control problem is given by the cost of the cheapest hedging strategy in which the number of non-freely exchangeable assets is kept constant over time.
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Dates and versions

hal-00003546 , version 1 (13-12-2004)
hal-00003546 , version 2 (07-01-2005)

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Cite

Imen Bentahar, Bruno Bouchard. Explicit characterization of the super-replication strategy in financial markets with partial transaction costs. Stochastic Processes and their Applications, 2007, 117 (5), pp.655-672. ⟨hal-00003546v2⟩
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