Limit Theorem for a Modified Leland Hedging Strategy under Constant Transaction Costs rate
We study the Leland model for hedging portfolios in the presence of a constant proportional transaction costs coefficient. The modified Leland's strategy recently defined by the second author, contrarily to the classical one, ensures the asymptotic replication of a large class of payoff. In this setting, we prove a limit theorem for the deviation between the real portfolio and the payoff. As Pergamenshchikov did in the framework of the usual Leland's strategy, we identify the rate of convergence and the associated limit distribution. This rate turns out to be improved using the modified strategy and non periodic revision dates.
|Date of creation:||22 Feb 2010|
|Note:||View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00467704|
|Contact details of provider:|| Web page: https://hal.archives-ouvertes.fr/|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Yuri M. Kabanov & (*), Mher M. Safarian, 1997.
"On Leland's strategy of option pricing with transactions costs,"
Finance and Stochastics,
Springer, vol. 1(3), pages 239-250.
- Y. M. Kabanov & M. Safarian, 1995. "On Leland's Strategy of Option Pricing with Transaction Costs," SFB 373 Discussion Papers 1995,65, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
When requesting a correction, please mention this item's handle: RePEc:hal:wpaper:hal-00467704. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CCSD)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.