Pricing and hedging game options in currency models with proportional transaction costs

2015/04/29 by Roux, Alet
#60G40 #91B28 #91B30 #Computational Finance (q-fin.CP) #FOS: Economics and business #FOS: Mathematics #Mathematical Finance (q-fin.MF) #Optimization and Control (math.OC)

paper · doi:10.48550/arxiv.1504.07920

Abstract

The pricing, hedging, optimal exercise and optimal cancellation of game or Israeli options are considered in a multi-currency model with proportional transaction costs. Efficient constructions for optimal hedging, cancellation and exercise strategies are presented, together with numerical examples, as well as probabilistic dual representations for the bid and ask price of a game option.

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