Multi-period minimax hedging strategies

European Journal of Operational Research

Volumn 93, Issue 1, 1996, Pages 185-204

  Howe, M A ^a   Rustem, B ^b   Selby, M J P ^c,d  

^a Nomura International Plc   (United Kingdom)

^b IMPERIAL COLLEGE LONDON   (United Kingdom)

^c GONVILLE AND CAIUS COLLEGE   (United Kingdom)

^d UNIVERSITY OF WARWICK   (United Kingdom)

Author keywords

Finance; Hedging; Minimax; Nonsmooth optimization; Transaction costs

Indexed keywords

ALGORITHMS; COSTS; ERRORS; MANAGEMENT; OPTIMIZATION; RISKS;

MULTI PERIOD MINIMAX HEDGING STRATEGY; NONSMOOTH OPTIMIZATION; TRANSACTION COSTS;

FINANCE;

EID: 0030212559     PISSN: 03772217     EISSN: None     Source Type: Journal    
DOI: 10.1016/0377-2217(95)00167-0     Document Type: Article

References (18)

1. Black, F., and Scholes, M. (1973), "The pricing of options and corporate liabilities", Journal of Political Economy 81, 637-659.
2. Boyle, P., and Emanuel, D. (1980), "Discretely adjusted option hedges", Journal of Financial Economics 8, 259-282.
3. Cox, J., and Ross, S. (1976), "The valuation of options for alternative stochastic processes", Journal of Financial Economics 3, 145-166.
4. Cox, J., and Rubinstein, M. (1984), Option Markets, Prentice-Hall, Englewood Cliffs, NJ.
5. Davis, M.H.A., and Norman, A.R. (1990), "Portfolio selection with transaction costs", Mathematics & Operations Research 15, 676-713.
6. Dutta, S.R.K., and Vidyasagan, M. (1977), "New algorithms for constrained MinMax optimization", Mathematical Programming 13, 140-155.
7. Gilster, J., and Lee, W. (1984), "The effects of transaction costs and different borrowing and lending rates on the option pricing model: A note", Journal of Finance 39, 1215-1222.
8. Hodges, S.D., and Neuberger, A. (1989), "Optimal replication of contingent claims under transaction costs", Review of Futures Markets 8, 222-239.
9. Howe, M. (1994), "A quasi-Newton algorithm for continuous minimax with applications to risk management in finance", PhD Dissertation, Imperial College London.
10. Howe, M., Rustem, B., and Selby, M.J.P. (1994), "Minimax hedging strategy", Computational Economics 7, 245-275.
11. Leland, H. (1985), "Option pricing and replication with transaction costs", The Journal of Finance 5, 1283-1301.
12. Luenberger, D. (1984), Linear and Nonlinear Programming, Addison-Wesley, Reading, MA.
13. Merton, R. (1973), "Theory of rational option pricing", Bell Journal of Economics and Management Science 4, 141-183.
14. Neuhaus, H. (1990), "Option valuation and hedging under transaction costs", PhD Dissertation, London Business School.
15. Panas, V.G. (1993), "Option pricing with transaction costs", PhD Dissertation, Imperial College London.
16. Rustem, B. (1992), "A constrained min-max algorithm for rival models of the same economic system", Mathematical Programming 53, 279-295.
17. Rustem, B. and M. Howe (1994), "A quasi-Newton algorithm for continuous minimax", Working Paper, Imperial College London.
18. Samuelson, P.A. (1965), "Rational theory of warrant pricing", Industrial Management Review 6, 13-31.