European Option Pricing under Jump Diffusion with Proportional Transaction Costs

2012 ◽  
Author(s):  
Haipeng Xing ◽  
Yang Yu ◽  
TiongWee Lim
Keyword(s):  
Option Pricing ◽  
Transaction Costs ◽  
Jump Diffusion ◽  
European Option ◽  
Proportional Transaction Costs ◽  
European Option Pricing

European Option Pricing with Transaction Costs

1993 ◽  
Vol 31 (2) ◽  
pp. 470-493 ◽  
Author(s):  
Mark H. A. Davis ◽  
Vassilios G. Panas ◽  
Thaleia Zariphopoulou
Keyword(s):  
Option Pricing ◽  
Transaction Costs ◽  
European Option ◽  
European Option Pricing

scholarly journals European Option Pricing with Transaction Costs in Lévy Jump Environment

2014 ◽  
Vol 2014 ◽  
pp. 1-6
Author(s):  
Jiayin Li ◽  
Huisheng Shu ◽  
Xiu Kan
Keyword(s):  
Option Pricing ◽  
Transaction Costs ◽  
Asset Price ◽  
Risky Asset ◽  
Time Interval ◽  
European Option ◽  
Price Model ◽  
Time Model ◽  
European Option Pricing ◽  
Asset Price Model

The European option pricing problem with transaction costs is investigated for a risky asset price model with Lévy jump. By the aid of arbitrage pricing theory and the generalized Itô formula (which includes Poisson jump), the explicit solution to the risk asset price model is given. According to arbitrage-free principle, we first discretize the continuous-time model. Then, in each small time interval, the transaction costs are introduced. By using theΔ-hedging strategy, the explicit solutions of the European options pricing formula with transaction costs are given for the risky asset price model with Lévy jump.

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