Optimal hedging in an extended binomial market under transaction costs

Josephy, Norman; Kimball, Lucia; Steblovskaya, Victoria

doi:10.1080/14697688.2015.1039225

Cited by 2 publications

(1 citation statement)

References 14 publications

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“…The purpose of the present subsection if to display a concrete RKHS H (K) in the discrete framework with the property that H (K) does not contain the Dirac masses δ x . The RKHS in question is generated by the binomial coefficients, and it is relevant for a host of applications; see e.g., [JKS16,Dok14,Gal01].…”

Section: And δ X1mentioning

confidence: 99%

Sampling with positive definite kernels and an associated dichotomy

Jørgensen¹,

Tian²

2017

Preprint

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We study classes of reproducing kernels K on general domains; these are kernels which arise commonly in machine learning models; models based on certain families of reproducing kernel Hilbert spaces. They are the positive definite kernels K with the property that there are countable discrete sample-subsets S; i.e., proper subsets S having the property that every function in H (K) admits an S-sample representation. We give a characterizations of kernels which admit such non-trivial countable discrete sample-sets. A number of applications and concrete kernels are given in the second half of the paper.

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Section: And δ X1mentioning

confidence: 99%

Sampling with positive definite kernels and an associated dichotomy

Jørgensen¹,

Tian²

2017

Preprint

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On the Numerical Aspects of Optimal Option Hedging With Transaction Costs

Josephy

Kimball

Steblovskaya

2017

Int. J. Theor. Appl. Finan.

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We present a numerical study of non-self-financing hedging of European options under proportional transaction costs. We describe an algorithmic approach based on a discrete time financial market model that extends the classical binomial model. We review the analytical basis for our algorithm and present a variety of empirical results using real market data. The performance of the algorithm is evaluated by comparing to a Black–Scholes delta hedge with transaction costs incorporated. We also evaluate the impact of recalibrating the hedging strategy one or more times during the life of the option using the most recent market data. These results are compared to a recalibrated Black–Scholes delta hedge modified for transaction costs.

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Optimal hedging in an extended binomial market under transaction costs

Cited by 2 publications

References 14 publications

Sampling with positive definite kernels and an associated dichotomy

Sampling with positive definite kernels and an associated dichotomy

On the Numerical Aspects of Optimal Option Hedging With Transaction Costs

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