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Hedging under Transaction Costs in Currency Markets: a Discrete‐Time Model

Author

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  • FREDDY DELBAEN
  • YURI M. KABANOV
  • ESKO VALKEILA

Abstract

We consider a discrete‐time model of a currency market with transaction costs and give a description of initial endowments that allow the investor to hedge a contingent claim in various currencies by a self‐financing portfolio.

Suggested Citation

  • Freddy Delbaen & Yuri M. Kabanov & Esko Valkeila, 2002. "Hedging under Transaction Costs in Currency Markets: a Discrete‐Time Model," Mathematical Finance, Wiley Blackwell, vol. 12(1), pages 45-61, January.
    • Handle: RePEc:bla:mathfi:v:12:y:2002:i:1:p:45-61
    DOI: 10.1111/1467-9965.00003
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    Citations

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    Cited by:

    1. Yuan Hu & Abootaleb Shirvani & W. Brent Lindquist & Frank J. Fabozzi & Svetlozar T. Rachev, 2021. "Market Complete Option Valuation using a Jarrow-Rudd Pricing Tree with Skewness and Kurtosis," Papers 2106.09128, arXiv.org.
    2. H. Mete Soner & Nizar Touzi, 2012. "Homogenization and asymptotics for small transaction costs," Papers 1202.6131, arXiv.org, revised Jun 2013.
    3. Grigoriev Pavel G., 2005. "On low dimensional case in the fundamental asset pricing theorem with transaction costs," Statistics & Risk Modeling, De Gruyter, vol. 23(1/2005), pages 33-48, January.
    4. Bruno Bouchard & Ludovic Moreau & Mete H. Soner, 2016. "Hedging under an expected loss constraint with small transaction costs," Post-Print hal-00863562, HAL.
    5. Alet Roux, 2007. "The fundamental theorem of asset pricing under proportional transaction costs," Papers 0710.2758, arXiv.org.
    6. Kabanov, Yu. M. & Stricker, Ch., 2001. "The Harrison-Pliska arbitrage pricing theorem under transaction costs," Journal of Mathematical Economics, Elsevier, vol. 35(2), pages 185-196, April.
    7. Hu, Yuan & Lindquist, W. Brent & Rachev, Svetlozar T. & Shirvani, Abootaleb & Fabozzi, Frank J., 2022. "Market complete option valuation using a Jarrow-Rudd pricing tree with skewness and kurtosis," Journal of Economic Dynamics and Control, Elsevier, vol. 137(C).
    8. repec:dau:papers:123456789/5455 is not listed on IDEAS
    9. Napp, Clotilde, 2001. "Pricing issues with investment flows Applications to market models with frictions," Journal of Mathematical Economics, Elsevier, vol. 35(3), pages 383-408, June.
    10. Beutner Eric, 2006. "Pure self-financing trading strategies under transaction costs," Statistics & Risk Modeling, De Gruyter, vol. 24(4/2006), pages 1-9, October.
    11. Maxim Bichuch, 2011. "Pricing a Contingent Claim Liability with Transaction Costs Using Asymptotic Analysis for Optimal Investment," Papers 1112.3012, arXiv.org.
    12. Alet Roux & Zhikang Xu, 2019. "Optimal investment and contingent claim valuation with exponential disutility under proportional transaction costs," Papers 1909.06260, arXiv.org, revised May 2021.
    13. Saul Jacka & Abdelkarem Berkaoui & Jon Warren, 2008. "No arbitrage and closure results for trading cones with transaction costs," Finance and Stochastics, Springer, vol. 12(4), pages 583-600, October.

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