On Leland's strategy of option pricing with transactions costs
We compute the limiting hedging error of the Leland strategy for the approximate pricing of the European call option in a market with transactions costs. It is not equal to zero in the case when the level of transactions costs is a constant, in contradiction with the claim in Leland (1985).
Volume (Year): 1 (1997)
Issue (Month): 3 ()
|Note:||received: February 1996; final version received: October 1996|
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