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On the number of deviations of Geometric Brownian Motion with drift from its extreme points with applications to transaction costs

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  • Poufinas, Thomas

Abstract

The number of deviations of a Geometric Brownian Motion with drifts from its extreme points is considered. The properties of these deviations are studied. As an application based on these results, the time instants at which investors decide to buy or sell are examined, when the price of an asset is assumed to follow a Geometric Brownian Motion. Extensions to the modelling of transaction costs are attempted.

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  • Poufinas, Thomas, 2008. "On the number of deviations of Geometric Brownian Motion with drift from its extreme points with applications to transaction costs," Statistics & Probability Letters, Elsevier, vol. 78(17), pages 3040-3046, December.
    • Handle: RePEc:eee:stapro:v:78:y:2008:i:17:p:3040-3046
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    References listed on IDEAS

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    1. Damgaard, Anders, 2003. "Utility based option evaluation with proportional transaction costs," Journal of Economic Dynamics and Control, Elsevier, vol. 27(4), pages 667-700, February.
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    Cited by:

    1. Thomas Poufinas, 2015. "On Transaction-Cost Models in Continuous-Time Markets," IJFS, MDPI, vol. 3(2), pages 1-34, April.

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