2 papers
q-fin.MF2014
Asymptotic replication with modified volatility under small transaction costs
Jiatu Cai, Masaaki Fukasawa
Dynamic hedging of an European option under a general local volatility model with small linear transaction costs is studied. A continuous control version of Leland's strategy that…
math.PR2014
Optimal discretization of hedging strategies with directional views
Jiatu Cai, Masaaki Fukasawa, Mathieu Rosenbaum +1
We consider the hedging error of a derivative due to discrete trading in the presence of a drift in the dynamics of the underlying asset. We suppose that the trader wishes to find…