Options Under Transaction Costs

ISBN-13: 9783836492393 / Angielski / Miękka / 2008 / 156 str.

Alet Roux

Opis

This book is aimed at researchers and PhD students in mathematical finance. It studies the pricing and hedging of options in financial markets with proportional transaction costs on trading in shares, modeled as bid-ask spreads, and different interest rates for borrowing and lending of cash. This is done by means of fair pricing and super-hedging. The fair price of an option is any market price for it that does not allow traders to make profit with no risk, and a super-hedging strategy allows the seller and buyer to remain in a solvent position after respectively delivering and receiving the option payoff. Efficient algo­rithms are presented for computing the bid and ask prices of European and American options; these prices serve as bounds on the fair prices. This unifies all existing algorithms for the calculation of such prices. As a by-product, a straightforward iterative method is found for determining the optimal super-hedging strategies (and stopping times) for both the buyer and seller of an option, and also optimal stopping strategies in the case of American options.

O autorze

Roux Alet Alet Roux is currently a lecturer in Mathematical Finance at the University of York. She holds a BCom (Hons) in Mathematical Statistics and a BSc (Hons) in Applied Mathematics from the University of Pretoria, an MPhil in Statistical Science from the University of Cambridge and a PhD in Mathematics from the University of York.