Book of Donmon Teith

We derive a nonlinear parabolic partial differential equation for the value of portfolios of options in the presence of proportional transaction costs. This ass

One of the most successful approaches to option hedging with transaction costs is the utility based approach pioneered by Hodges and Neuberger (1989). However,

In a market with transaction costs the option hedging is costly. The idea presented by Leland (1985) was to include the expected transaction costs in the cost o

We introduce a new class of strategies for hedging derivative securities taking into account transaction costs, assuming lognormal continuous-time prices for th

Considerable theoretical work has been devoted to the problem of option pricing and hedging with transaction costs. A variety of methods have been suggested and