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Black and Scholes pricing and markets with transaction costs: An example


  • Haim Reisman

    () (Davidson School of Management, Technion-Israel Institute of Technology, Haifa 32000, Israel Manuscript)


The paper shows that in the presence of transaction costs, there exists a viable price system in which prices of call options are arbitrarily close to the price of the stock. The construction of such an example is possible no matter how small the volatility of the stock or how small the transaction costs.

Suggested Citation

  • Haim Reisman, 2001. "Black and Scholes pricing and markets with transaction costs: An example," Finance and Stochastics, Springer, vol. 5(4), pages 549-555.
  • Handle: RePEc:spr:finsto:v:5:y:2001:i:4:p:549-555
    Note: received: June 2000; final version received: January 2001

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    References listed on IDEAS

    1. repec:dau:papers:123456789/6041 is not listed on IDEAS
    2. Rene Carmona & Michael Tehranchi, 2004. "A Characterization of Hedging Portfolios for Interest Rate Contingent Claims," Papers math/0407119,
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    More about this item


    Option pricing; transaction costs;

    JEL classification:

    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing


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