Pricing a European Basket Option in the Presence of Proportional Transaction Costs

References

• Akian , M. 1996 . On an investment‐consumption model with transaction costs . SIAM Journal of Control and Optimisation , 34 : 329 – 264 .
   Web of Science ®Google Scholar
• Atkinson , C. and Mokkhavesa , S. 2003 . “ Multi‐asset portfolio optimisation with transaction costs ” . Preprint, Department of Mathematics, Imperial College
   Google Scholar
• Atkinson , C. 1997 . Portfolio management with transaction costs . Proceedings of the Royal Society , 453 : 551 – 562 .
   Google Scholar
• Atkinson , C. and Wilmott , P. 1995 . Portfolio management with transaction costs: an asymptotic analysis . Mathematical Finance , 5 : 357 – 367 .
   Google Scholar
• Bensaid , B. 1992 . Derivative asset pricing with transaction costs . Mathematical Finance , 2 : 63 – 86 .
   Google Scholar
• Black , F. and Scholes , M. 1973 . The pricing of options and corporate liabilities . Journal of Political Economy , 81 : 637 – 654 .
   Web of Science ®Google Scholar
• Boyle , P. P. and Vorst , T. 1992 . Option replication in discrete time with transaction costs . Journal of Finance , 47 : 271 – 293 .
   Web of Science ®Google Scholar
• Cadenillas , A. 2000 . Consumption‐investment problems with transaction costs: survey and open problems . Mathematical Methods of Operations Research , 51 : 43 – 68 .
   Web of Science ®Google Scholar
• Constantinides , G. M. and Zariphopoulou , T. 1999 . Bounds on prices of contingent claims in an intertemporal economy with proportional transaction costs and general preferences . Finance and Stochastics , 3 : 345 – 369 .
   Google Scholar
• Cvitanic , A. J. 1999 . A closed‐form solution to the problem of super‐replication under transaction costs . Finance and Stochastics , 3 : 35 – 54 .
   Google Scholar
• Davis , M. H. A. and Clark , J. M. C. 1994 . A note on super‐replicating strategies . Philosophical Transactions of the Royal Society , A347 : 485 – 494 .
   Google Scholar
• Davis , M. H. A. 1993 . European option pricing with transaction costs . SIAM Journal of Control and Optimisation , 31 : 470 – 493 .
   Web of Science ®Google Scholar
• Dixit , A. 1991 . A simplified treatment of the theory of optimal Regulation of Brownian motion . Journal of Economic Dynamics and Control , 15 : 657 – 673 .
   Web of Science ®Google Scholar
• Dumas , B. 1991 . Super‐contact and related optimality conditions . Journal of Economic Dynamics and Control , 15 : 675 – 685 .
   Web of Science ®Google Scholar
• Edirisinghe , C. 1993 . Optimal replication of options with transaction costs and trading restrictions . Journal of Financial and Quantitative Analysis , 28 : 117 – 138 .
   Web of Science ®Google Scholar
• Henrotte , P. 1993 . “ Transaction costs and duplication strategies ” . Working Paper, Graduate School of Business, Stanford University
   Google Scholar
• Hodges , S. D. and Neuberger , A. 1989 . Optimal replication of contingent claims under transaction costs . Review of Futures Markets , 8 : 222 – 239 .
   Google Scholar
• Hoggard , T. 1994 . Hedging option portfolios in the presence of transaction costs . Advances in Futures and Options Research , 7 : 21 – 35 .
   Google Scholar
• Kabanov , Y. M. and Safarian , M. M. 1997 . On Leland's strategy of option pricing with transaction costs . Finance and Stochastics , 1 : 239 – 250 .
   Google Scholar
• Karatzas , I. 1989 . Optimization problems in the theory of continuous trading . SIAM Journal of Control and Optimisation , 27 : 1221 – 1259 .
   Web of Science ®Google Scholar
• Karatzas , I. and Shreve , S. E. 1998 . Methods of Mathematical Finance (Springer Verlag)
   Google Scholar
• Korn , R. 1998 . Portfolio optimisation with strictly positive transaction costs and impulse control . Finance and Stochastics , 2 : 85 – 114 .
   Google Scholar
• Korn , R. and Korn , E. 2001 . Option Pricing and Portfolio Optimisation: Modern Methods of Financial Mathematics (AMS)
   Google Scholar
• Leland , H. 1985 . Option pricing and replication with transactions costs . The Journal of Finance , 40 : 1283 – 1031 .
   Web of Science ®Google Scholar
• Musiela , M. and Rutkowski , M. 1997 . Martingale Methods in Financial Modelling (Springer Verlag)
   Google Scholar
• Nayfeh , A. H. 2000 . Perturbation Methods , Chichester : John Wiley & Sons .
   Google Scholar
• Rogers LCG. 2000. Why is the effect of proportional transaction costs O(deltâ2/3)? Preprint, Statistical Laboratory, University of Cambridge, available at http://www.statslab.cam.ac.uk/~chris/papers.html
   Google Scholar
• Shreve , S. E. and Soner , H. M. 1994 . Optimal investment and consumption with transaction costs . Annals of Applied Probability , 4 : 609 – 692 .
   Web of Science ®Google Scholar
• Toft , K. B. 1996 . On the mean variance trade‐off in option replication with transaction costs . Journal of Financial and Quantitative Analysis , 31 : 233 – 263 .
   Web of Science ®Google Scholar
• Touzi , N. 1999 . Super‐replication under proportional transaction costs: from discrete to continuous‐time models . Mathematical Methods of Operations Research , 50 : 297 – 320 .
   Google Scholar
• Whalley , A. E. and Wilmott , P. 1997 . An asymptotic analysis of the Davis, Panas & Zariphopoulou model for option pricing with transaction costs . Mathematical Finance , 7 : 307 – 324 .
   Web of Science ®Google Scholar