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Hedging American contingent claims with arbitrage costs

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  • Bo, Wang
  • Qingxin, Meng

Abstract

In a continuous-time market model, the wealth process have an arbitrage costs. we give a representation for the upper hedging prices hup of American contingent claims. Furthermore, we give some example of the arbitrage costs.

Suggested Citation

  • Bo, Wang & Qingxin, Meng, 2007. "Hedging American contingent claims with arbitrage costs," Chaos, Solitons & Fractals, Elsevier, vol. 32(2), pages 598-603.
    • Handle: RePEc:eee:chsofr:v:32:y:2007:i:2:p:598-603
    DOI: 10.1016/j.chaos.2005.11.007
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    References listed on IDEAS

    as
    1. N. El Karoui & S. Peng & M. C. Quenez, 1997. "Backward Stochastic Differential Equations in Finance," Mathematical Finance, Wiley Blackwell, vol. 7(1), pages 1-71, January.
    2. Meng, Qingxin & Wang, Bo, 2005. "Hedging American contingent claims with constrained portfolios under a higher interest rate for borrowing," Chaos, Solitons & Fractals, Elsevier, vol. 24(2), pages 617-625.
    3. Ioannis Karatzas & (*), S. G. Kou, 1998. "Hedging American contingent claims with constrained portfolios," Finance and Stochastics, Springer, vol. 2(3), pages 215-258.
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    Cited by:

    1. Wang, Bo & Song, Ruili, 2009. "The Application of backward stochastic differential equation with stopping time in hedging American contingent claims," Chaos, Solitons & Fractals, Elsevier, vol. 42(5), pages 2629-2634.

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