Approximate hedging in a local volatility model with proportional transaction costs
Quoc, Tuan Tran; Lépinette, Emmanuel (2014), Approximate hedging in a local volatility model with proportional transaction costs, Applied Mathematical Finance, 21, 4, p. 313-341. http://dx.doi.org/10.1080/1350486X.2013.871802
TypeArticle accepté pour publication ou publié
External document linkhttp://hal.archives-ouvertes.fr/hal-00687389
Journal nameApplied Mathematical Finance
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Abstract (EN)Local volatility models are popular because they can be simply calibrated to the market of European options. We extend the results of ,  for such models, i.e. we propose a modi ed Leland method which allows us to approximately replicate a European contingent claim when the market is under proportional transaction costs.
Subjects / Keywordstransaction costs; Leland strategy; approximate hedging; Black-Scholes formula
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