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The Least Cost Super Replicating Portfolio In The Boyle Vorst Discrete Time Option Pricing Model With Transactions Costs
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Book Synopsis The Least Cost Super Replicating Portfolio in the Boyle-Vorst Discrete-time Option Pricing Model with Transactions Costs by : Ken Palmer
Download or read book The Least Cost Super Replicating Portfolio in the Boyle-Vorst Discrete-time Option Pricing Model with Transactions Costs written by Ken Palmer and published by . This book was released on 2001 with total page 21 pages. Available in PDF, EPUB and Kindle. Book excerpt: Working in a binomial framework, Boyle and Vorst derived self-financing strategies perfectly replicating the final payoffs to long positions in European call and put options, assuming proportional transactions costs on trades in the stocks. The initial cost of such a strategy yields, by an arbitrage argument, an upper bound for the option price. A lower bound for the option price is obtained by replicating a short position. However, even when a contingent claim has a unique replicating portfolio, there may exist super replicating portfolios of lower cost. Nevertheless, Bensaid, Lesne, Pages and Scheinkman gave conditions under which the cost of the replicating portfolio does not exceed the cost of any super replicating portfolio. These results were generalised by Stettner and Rutkowski to the case of asymmetric transcations costs. Palmer gave a further slight generalisation with what seemed to be a simpler proof. It is known from these results that no super replicating portfolio for long positions in calls and puts can have a lower cost than the replicating portfolio. However, even when a short call or put has a unique replicating portfolio, there may exist super replicating portfolios of lower cost when transactions costs are sufficiently large. Then a lower bound for the call or put price would be the negative of the least possible cost of such a super replicating portfolio. So it is important to be able to calculate this cost. Now the cost of the replicating portfolio can easily be calculated by backward recursion. However, as there are possibly infinitely many super replicating portfolios, it is not immediately obvious how the least possible cost of a super replicating portfolio can be efficiently calculated. The aim of this paper is to show how this cost can be calculated in the one-period case.contemplating priv Ơ
Book Synopsis The Least Cost Super Replicating Portfolio in the Boyle-Vorst Discrete-time Option Pricing Model with Transaction Costs: the One-period Case by : Ken Palmer
Download or read book The Least Cost Super Replicating Portfolio in the Boyle-Vorst Discrete-time Option Pricing Model with Transaction Costs: the One-period Case written by Ken Palmer and published by . This book was released on 2001 with total page 21 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Replicating and Super Replicating Portfolios in the Boyle-Vorst Discrete-time Option Pricing Model with Transactions Costs by : Ken Palmer
Download or read book Replicating and Super Replicating Portfolios in the Boyle-Vorst Discrete-time Option Pricing Model with Transactions Costs written by Ken Palmer and published by . This book was released on 2001 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: Working in a binomial framework, Boyle and Vorst (1992) derive self-financing strategies perfectly replicating the final payoffs to long positions in European call and put options, assuming proportional transactions costs on trades in the stocks. The initial cost of such a strategy yields, by an arbitrage argument, an upper bound for the option price. A lower bound for the option price is obtained by replicating a short position. The authors' first aim in this paper is to clarify the conditions under which there is a unique replicating strategy for an arbitrary contingent claim. Following Stettner (1997) and Rutkowski (1998), the authors work in the framework of asymmetric proportional transactions costs, which includes not only the model of Boyle and Vorst but also that of Bensaid, Lesne, Pages and Scheinkman (1992). The authors first clarify the conditions in the case of a one-period model and then extend them to the multi-period case, yielding a result which extends slightly a result of Rutkowski. Even when a contingent claim has a unique replicating portfolio, there may exist super replicating portfolios of lower cost. However, Bensaid, Lesne, Pages and Scheinkman gave super replicating portfolio. These results were generalised by Stettner and Rutkowski to the case of asymmetric transactions costs. Here the authors provide a further slight generalisation and give what seems to be a simpler proof. There are two results here: one gives a class of contingent claims for which the cost of the replicating portfolio does not exceed the cost of any super replicating portfolio and the other gives conditions on the level of transactions costs such that for any contingent claim the cost of the replicating portfolio does not exceed the cost of any super replicating portfolio. Finally the authors conjecture a necessary and sufficient condition in terms of computable "terminal probabilities" for the latter to hold for a given contingent claim when the conditions on the transactions costs do not hold.
Book Synopsis Replication and Super Replicating Portfolios in the Boyle-Vorst Discrete-time Option Pricing Model with Transactions Costs by :
Download or read book Replication and Super Replicating Portfolios in the Boyle-Vorst Discrete-time Option Pricing Model with Transactions Costs written by and published by . This book was released on 2001 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Replicating and Super Replicating Portfolios in the Boyle-Vorst Discrete-time Option Pricing Model with Transaction Costs by : Ken Palmer
Download or read book Replicating and Super Replicating Portfolios in the Boyle-Vorst Discrete-time Option Pricing Model with Transaction Costs written by Ken Palmer and published by . This book was released on 2001 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Advances In Quantitative Analysis Of Finance And Accounting (Vol. 5) by : Cheng Few Lee
Download or read book Advances In Quantitative Analysis Of Finance And Accounting (Vol. 5) written by Cheng Few Lee and published by World Scientific. This book was released on 2007-07-27 with total page 345 pages. Available in PDF, EPUB and Kindle. Book excerpt: News Professor Cheng-Few Lee ranks #1 based on his publications in the 26 core finance journals, and #163 based on publications in the 7 leading finance journals (Source: Most Prolific Authors in the Finance Literature: 1959-2008 by Jean L Heck and Philip L Cooley (Saint Joseph's University and Trinity University). Advances in Quantitative Analysis of Finance and Accounting is an annual publication designed to disseminate recent developments in the quantitative analysis of finance and accounting. The publication is a forum for statistical and quantitative analyses of issues in finance and accounting as well as applications of quantitative methods to problems in financial management, financial accounting, and business management. Its objective is to promote interaction between academic research in finance and accounting with applied research in the financial community and the accounting profession.The chapters in this volume cover a wide range of pressing topics including security analysis and mutual fund management, option pricing theory and application, interest rate spread, and electricity pricing.
Book Synopsis Extensions to the Boyle-Vorst Discrete-time Option Pricing Model with Transactions Costs by : Ken Palmer
Download or read book Extensions to the Boyle-Vorst Discrete-time Option Pricing Model with Transactions Costs written by Ken Palmer and published by . This book was released on 2000 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: Working in a binomial framework, Boyle and Vorst (1992) derive self-financing strategies perfectly replicating the final payoffs to long positions in European call and put options, assuming proportional transactions costs on trades in the stocks. The initial cost of such a strategy yields, by an arbitrage argument, an upper bound for the option price. A lower bound for the option price is obtained by replicating a short position. However, for short positions, Boyle and Vorst have to impose three additional conditions. The authors' first aim in this paper is to remove Boyle and Vorst's conditions for the replication of short calls and puts. Boyle and Vorst's algorithm calculates the current holdings in stocks and bonds in terms of those at the following period. This is unlike the case of no transaction costs where the current cost of the option can be calculated directly from the costs at the following period. The authors' second aim is to show that even in the case of transactions costs the cost of replication can be directly calculated also. As a by-product, the authors are able to derive upper bounds for the cost of replication which are valid for long positions and also for short positions when two of Boyle and Vorst's additional conditions hold. The authors' third aim is to show that the time of computation using the backward recursion can be halved. This seems to to be a new observation, even in the case of no transactions costs.
Book Synopsis Mathematical Models in Finance by : S.D. Howison
Download or read book Mathematical Models in Finance written by S.D. Howison and published by CRC Press. This book was released on 1995-05-15 with total page 164 pages. Available in PDF, EPUB and Kindle. Book excerpt: Mathematical Models in Finance compiles papers presented at the Royal Society of London discussion meeting. Topics range from the foundations of classical theory to sophisticated, up-to-date mathematical modeling and analysis. In the wake of the increased level of mathematical awareness in the financial research community, attention has focused on fundamental issues of market modelling that are not adequately allowed for in the standard analyses. Examples include market anomalies and nonlinear coupling effects, and demand new synthesis of mathematical and numerical techniques. This line of inquiry is further stimulated by ever tightening profits due to increased competition. Several papers in this volume offer pointers to future developments in this area.
Book Synopsis Mathematics of Derivative Securities by : Michael A. H. Dempster
Download or read book Mathematics of Derivative Securities written by Michael A. H. Dempster and published by Cambridge University Press. This book was released on 1997-10-13 with total page 614 pages. Available in PDF, EPUB and Kindle. Book excerpt: During 1995 the Isaac Newton Institute for the Mathematical Sciences at Cambridge University hosted a six month research program on financial mathematics. During this period more than 300 scholars and financial practitioners attended to conduct research and to attend more than 150 research seminars. Many of the presented papers were on the subject of financial derivatives. The very best were selected to appear in this volume. They range from abstract financial theory to practical issues pertaining to the pricing and hedging of interest rate derivatives and exotic options in the market place. Hence this book will be of interest to both academic scholars and financial engineers.
Book Synopsis Philosophical Transactions of the Royal Society of London by :
Download or read book Philosophical Transactions of the Royal Society of London written by and published by . This book was released on 1994 with total page 760 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Option Replication in Discrete Time with Transaction Costs by : Phelim P. Boyle
Download or read book Option Replication in Discrete Time with Transaction Costs written by Phelim P. Boyle and published by . This book was released on 1992 with total page 23 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Option Pricing in Discrete Time with Transaction Costs by : P. P. Boyle
Download or read book Option Pricing in Discrete Time with Transaction Costs written by P. P. Boyle and published by . This book was released on 1990 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Option Replication with Large Transactions Costs by : Ariane Reiss
Download or read book Option Replication with Large Transactions Costs written by Ariane Reiss and published by . This book was released on 1999 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: Contrary to a continuous-time model, in a discrete-time binomial model it is possible to construct a self-financing strategy which exactly replicates the payoff of a European option contract at maturity in the presence of proportional transactions costs. We derive an upper boundary for the cost factor in a market where all investors face the same factor. This upper boundary ensures the efficiency of the riskfree bond price as well as the stock price process. It turns out that perfect replication is optimal in the presence of only one transactions costs factor. Furthermore, conditions are given under which superreplicating strategies are dominant under differential transactions costs. A closed-form solution for the value of a Short call option is derived. While this least initial endowment is preference-free, the individual replicating strategy is preference-dependent. In addition, we show how the value of a Long European call option is derived computationally easily.
Book Synopsis Portfolio Optimisation and Option Pricing in Discrete Time with Transaction Costs by : Gary Sze Huat Quek
Download or read book Portfolio Optimisation and Option Pricing in Discrete Time with Transaction Costs written by Gary Sze Huat Quek and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Option Pricing in Discrete-Time Incomplete Market Models by : Lukasz Stettner
Download or read book Option Pricing in Discrete-Time Incomplete Market Models written by Lukasz Stettner and published by . This book was released on 2001 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Various aspects of pricing of contingent claims in discrete time for incomplete market models are studied. Formulas for prices with proportional transaction costs are obtained. Some results concerning pricing with concave transaction costs are shown. Pricing by the expected utility of terminal wealth isalso considered.
Book Synopsis Pricing and Hedging Options in Discrete Time with Liquidity Risk by : Yegor Sorokin
Download or read book Pricing and Hedging Options in Discrete Time with Liquidity Risk written by Yegor Sorokin and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Option Replication in Discrete Time with Transactions Costs : a Note by : Jean LeFoll
Download or read book Option Replication in Discrete Time with Transactions Costs : a Note written by Jean LeFoll and published by . This book was released on 1993 with total page 16 pages. Available in PDF, EPUB and Kindle. Book excerpt:
