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Explicit Solution of the Multivariate Super-Replication Problem under Transaction Costs

  • Bouchard, Bruno
  • Touzi, Nizar
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    We consider a multivariate financial market with transaction costs as in Kabanov. We study the problem of finding the minimal initial capital needed to hedge, without risk, European-type contingent claims. We prove that the value of this stochastic control problem is given by the cost of the cheapest buy-and-hold strategy. This is an extension of the already known result in the one-dimensional case. An important feature of our analysis is that we do not make use of the dual formulation of the problem, as in the previous literature.

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    File URL: http://basepub.dauphine.fr/xmlui/bitstream/123456789/1533/2/2000-5.ps
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    Paper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/1533.

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    Date of creation: 2000
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    Publication status: Published in The Annals of Applied Probability, 2000, Vol. 10, no. 3. pp. 685-708.Length: 23 pages
    Handle: RePEc:dau:papers:123456789/1533
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