Linear vector optimization and European option pricing under proportional transaction costs
Pricing of Securities
2014-07-23 v1 Optimization and Control
Probability
Abstract
A method for pricing and superhedging European options under proportional transaction costs based on linear vector optimisation and geometric duality developed by Lohne & Rudloff (2014) is compared to a special case of the algorithms for American type derivatives due to Roux & Zastawniak (2014). An equivalence between these two approaches is established by means of a general result linking the support function of the upper image of a linear vector optimisation problem with the lower image of the dual linear optimisation problem.
Keywords
Cite
@article{arxiv.1407.5877,
title = {Linear vector optimization and European option pricing under proportional transaction costs},
author = {Alet Roux and Tomasz Zastawniak},
journal= {arXiv preprint arXiv:1407.5877},
year = {2014}
}