Bounds on prices of contingent claims in an intertemporal economy with proportional transaction costs and general preferences
AbstractAnalytic bounds on the reservation write price of European-style contingent claims are derived in the presence of proportional transaction costs in a model which allows for intermediate trading. The option prices are obtained via a utility maximization approach by comparing the maximized utilities with and without the contingent claim. The mathematical tools come mainly from the theories of singular stochastic control and viscosity solutions of nonlinear partial differential equations.
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Bibliographic InfoArticle provided by Springer in its journal Finance and Stochastics.
Volume (Year): 3 (1999)
Issue (Month): 3 ()
Note: received: October 1997; final version received: August 1998
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Web page: http://www.springerlink.com/content/101164/
Other versions of this item:
- George M. Constantinides & Thaleia Zariphopoulou, . "Bounds on Prices of Contingent Claims in an Intertemporal Economy with Proportional Transaction Costs and General Preferences," CRSP working papers 347, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
- C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
- D9 - Microeconomics - - Intertemporal Choice and Growth
- G1 - Financial Economics - - General Financial Markets
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