Related papers: Binary markets under transaction costs
We prove the Fundamental Theorem of Asset Pricing for a discrete time financial market where trading is subject to proportional transaction cost and the asset price dynamic is modeled by a family of probability measures, possibly…
We prove the superhedging duality for a discrete-time financial market with proportional transaction costs under model uncertainty. Frictions are modeled through solvency cones as in the original model of [Kabanov, Y., Hedging and…
We consider fundamental questions of arbitrage pricing arising when the uncertainty model is given by a set of possible mutually singular probability measures. With a single probability model, essential equivalence between the absence of…
We consider a multivariate financial market with transaction costs and study the problem of finding the minimal initial capital needed to hedge, without risk, European-type contingent claims. The model is similar to the one considered in…
We consider a discrete time financial market with proportional transaction costs under model uncertainty, and study a num\'eraire-based semi-static utility maximization problem with an exponential utility preference. The randomization…
In a financial market with a continuous price process and proportional transaction costs we investigate the problem of utility maximization of terminal wealth. We give sufficient conditions for the existence of a shadow price process,…
Using elementary arguments, we show how to derive $\mathbf{L}_p$-error bounds for the approximation of frictionless wealth process in markets with proportional transaction costs. For utilities with bounded risk aversion, these estimates…
We study, from the perspective of large financial markets, the asymptotic arbitrage opportunities in a sequence of binary markets approximating the fractional Black-Scholes model. This approximating sequence was introduced by Sottinen and…
We show that the lack of arbitrage in a model with both fixed and proportional transaction costs is equivalent to the existence of a family of absolutely continuous single-step probability measures, together with an adapted process with…
In this article we consider the Merton problem in a market with a single risky asset and transaction costs. We give a complete solution of the problem up to the solution of a free-boundary problem for a first-order differential equation,…
We study contingent claims in a discrete-time market model where trading costs are given by convex functions and portfolios are constrained by convex sets. In addition to classical frictionless markets and markets with transaction costs or…
The paper develops general, discrete, non-probabilistic market models and minmax price bounds leading to price intervals for European options. The approach provides the trajectory based analogue of martingale-like properties as well as a…
We revisit optimal execution of an active portfolio in the presence of slippage (aka linear, proportional, or absolute-value) costs. Market efficiency implies a close balance between active alphas and trading costs, so even small changes to…
While absence of arbitrage in frictionless financial markets requires price processes to be semimartingales, non-semimartingales can be used to model prices in an arbitrage-free way, if proportional transaction costs are taken into account.…
We prove a version of the fundamental theorem of asset pricing (FTAP) in continuous time that is based on the strict no-arbitrage condition and that is applicable to both frictionless markets and markets with proportional transaction costs.…
In markets with transaction costs, consistent price systems play the same role as martingale measures in frictionless markets. We prove that if a continuous price process has conditional full support, then it admits consistent price systems…
We consider the Brownian market model and the problem of expected utility maximization of terminal wealth. We, specifically, examine the problem of maximizing the utility of terminal wealth under the presence of transaction costs of a…
We present a formulation of the transaction cost analysis (TCA) in the Bayesian framework for the primary purpose of comparing broker algorithms using standardized benchmarks. Our formulation allows effective calculation of the expected…
We consider a nondominated model of a discrete-time financial market where stocks are traded dynamically, and options are available for static hedging. In a general measure-theoretic setting, we show that absence of arbitrage in a…
We investigate the general structure of optimal investment and consumption with small proportional transaction costs. For a safe asset and a risky asset with general continuous dynamics, traded with random and time-varying but small…