Price systems for markets with transaction costs and control problems for some finance problems

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In a market with transaction costs, the price of a derivative can be expressed in terms of (preconsistent) price systems (after Kusuoka (1995)). In this paper, we consider a market with binomial model for stock price and discuss how to generate the price systems. From this, the price formula of a derivative can be reformulated as a stochastic control problem. Then the dynamic programming approach can be used to calculate the price. We also discuss optimization of expected utility using price systems.
Published at http://dx.doi.org/10.1214/074921706000001094 in the IMS Lecture Notes Monograph Series (http://www.imstat.org/publications/lecnotes.htm) by the Institute of Mathematical Statistics (http://www.imstat.org)

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Probability, Computational Finance, 60K35, 60K35 (Primary)

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http://salesiana.dossiersoluciones.com/handle/123456789/210199

Consulte el texto completo en el siguiente enlace:

https://arxiv.org/abs/math/0702828
 http://arxiv.org/abs/math/0702828
 IMS Lecture Notes Monograph Series 2006, Vol. 52, 257-271
 doi:10.1214/074921706000001094

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arXiv