Geodesic
Approximate hedging with constant proportional transaction costs in financial markets with jumps
Teoriâ veroâtnostej i ee primeneniâ, Tome 65 (2020) no. 2, pp. 281-311

Voir la notice de l'article provenant de la source Math-Net.Ru

We study a problem of option replication under constant proportional transaction costs in models where stochastic volatility and jumps are combined to capture the market's important features. Assuming some mild condition on the jump size distribution, we show that transaction costs can be approximately compensated by applying the Leland adjusting volatility principle and the asymptotic property of the hedging error due to discrete readjustments. In particular, the jump risk can be approximately eliminated, and the results established in continuous diffusion models are recovered. The study also confirms that, for the case of constant trading cost rate, the approximate results established by Kabanov and Safarian [Finance Stoch., 1 (1997), pp. 239–250] and by Pergamenschikov [Ann. Appl.Probab., 13 (2003), pp. 1099–1118] are still valid in jump-diffusion models with deterministic volatility.
Keywords: transaction costs, Leland strategy, jump models, stochastic volatility, approximate hedging, limit theorem, super-hedging, quantile hedging. 
@article{TVP_2020_65_2_a2,
     author = {T. Nguyen and S. M. Pergamenshchikov},
     title = {Approximate hedging with constant proportional transaction costs in financial markets with jumps},
     journal = {Teori\^a vero\^atnostej i ee primeneni\^a},
     pages = {281--311},
     publisher = {mathdoc},
     volume = {65},
     number = {2},
     year = {2020},
     language = {ru},
     url = {http://geodesic.mathdoc.fr/item/TVP_2020_65_2_a2/}
}
TY  - JOUR
AU  - T. Nguyen
AU  - S. M. Pergamenshchikov
TI  - Approximate hedging with constant proportional transaction costs in financial markets with jumps
JO  - Teoriâ veroâtnostej i ee primeneniâ
PY  - 2020
SP  - 281
EP  - 311
VL  - 65
IS  - 2
PB  - mathdoc
UR  - http://geodesic.mathdoc.fr/item/TVP_2020_65_2_a2/
LA  - ru
ID  - TVP_2020_65_2_a2
ER  - 
%0 Journal Article
%A T. Nguyen
%A S. M. Pergamenshchikov
%T Approximate hedging with constant proportional transaction costs in financial markets with jumps
%J Teoriâ veroâtnostej i ee primeneniâ
%D 2020
%P 281-311
%V 65
%N 2
%I mathdoc
%U http://geodesic.mathdoc.fr/item/TVP_2020_65_2_a2/
%G ru
%F TVP_2020_65_2_a2
T. Nguyen; S. M. Pergamenshchikov. Approximate hedging with constant proportional transaction costs in financial markets with jumps. Teoriâ veroâtnostej i ee primeneniâ, Tome 65 (2020) no. 2, pp. 281-311. http://geodesic.mathdoc.fr/item/TVP_2020_65_2_a2/