Option pricing and replication with tran
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Stylianos Perrakis; Jean Lefoll
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Article
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2000
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Elsevier Science
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English
β 325 KB
This paper derives optimal perfect hedging portfolios in the presence of transaction costs within the binomial model of stock returns, for a market maker that establishes bid and ask prices for American call options on stocks paying dividends prior to expiration. It is shown that, while the option h