The scaling limit of superreplication prices with small transaction costs in the multivariate case

Bank, Peter; Dolinsky, Yan and Perkkiö, Ari-Pekka (2017): The scaling limit of superreplication prices with small transaction costs in the multivariate case. In: Finance and Stochastics, Vol. 21, No. 2: pp. 487-508

Abstract

Kusuoka (Ann. Appl. Probab. 5:198–221, 1995) showed how to obtain non-trivial scaling limits of superreplication prices in discrete-time models of a single risky asset which is traded at properly scaled proportional transaction costs. This article extends the result to a multivariate setup where the investor can trade in several risky assets. The -expectation describing the limiting price involves models with a volatility range around the frictionless scaling limit that depends not only on the transaction costs coefficients, but also on the chosen complete discrete-time reference model.

• Item Type: Journal article
• Faculties: Mathematics, Computer Science and Statistics > Mathematics > Workgroup Financial Mathematics
• Subjects: 500 Science > 510 Mathematics
• ISSN: 0949-2984
• Language: English