Mean-variance hedging under transaction costs

Eric Beutner*

*Corresponding author for this work

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

The paper proposes a new approach to the mean-variance-hedging problem under transaction costs. This approach is based on the idea of dividing the gain functional into two parts. One part representing the gains resulting from a pure buying strategy, and the other part representing the gains resulting from a pure selling strategy. The problem will be studied in a general incomplete market in discrete time. Some technical assumptions such as the RAS condition are excluded.

Original languageEnglish
Pages (from-to)539-557
Number of pages19
JournalMathematical Methods of Operations Research
Volume65
Issue number3
DOIs
Publication statusPublished - 1 Jun 2007
Externally publishedYes

Keywords

  • Hedging
  • Mean-variance-hedging
  • Self-financing
  • Sum of closed convex cones in L
  • Transaction costs

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