On the fractional Black-Scholes market with transaction costs

Details On the fractional Black-Scholes market with transaction costs On the fractional Black-Scholes market with transaction costs

2010-05-03

arxiv.org/abs/1005.0211v1

Economy

Quantitative Finance

Pricing of Securities

Scientific paper

We consider fractional Black-Scholes market with proportional transaction costs. When transaction costs are present, one trades periodically i.e. we have the discrete trading with equidistance $n^{-1}$ between trading times. We derive a non trivial hedging error for a class of European options with convex payoff in the case when the transaction costs coefficients decrease as $n^{-(1-H)}$. We study the expected hedging error and asymptotic behavior of the hedge as $H \to 1/2$

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