Optimal replication of contingent claims under portfolio constraints

Review of Financial Studies

Volumn 11, Issue 1, 1998, Pages 59-79

  Broadie, Mark ^b   Cvitanić, Jakša ^a   Soner, H Mete ^b  

^a Och Spine at New York Presbyterian Hospitals   (United States)

^b NONE

Author keywords

[No Author keywords available]

Indexed keywords

EID: 0040249268     PISSN: 08939454     EISSN: None     Source Type: Journal    
DOI: 10.1093/rfs/11.1.59     Document Type: Article

References (26)

1. Bardhan, I., 1995, "Synthetic Replication of American Contingent Claims when Portfolios are Constrained," Stochastic Processes and Applications, 57, 149-165.
2. Barles, G., and M. H. Soner, 1998, "Option Pricing with Transaction Costs and a Nonlinear , Black-Scholes Equation," working paper, Carnegie Mellon University; forthcoming in Finance and Stochastics.
3. Black, F., and M. Scholes, 1973, "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, 81, 637-654.
4. Boyle, P., and K. Tan, 1994, "Lure of the Linear," Risk, 7 (April), 43-46.
5. Boyle, P., and T. Vorst, 1992, "Option Pricing in Discrete Time with Transactions Costs," Journal of Finance, 47, 271-293.
6. Cvitanić, J., and I. Karatzas, 1993, "Hedging Contingent Claims with Constrained Portfolios," Annals of Applied Probability, 3, 652-681.
7. Cvitanić, J., and I. Karatzas, 1996, "Hedging and Portfolio Optimization under Transaction Costs: A Martingale Approach," Mathematical Finance, 6, 133-165.
8. Duffie, D., 1996, Dynamic Asset Pricing Theory (2d ed.), Princeton University Press, Princeton, N.J.
9. El Karoui N., and M. C. Quenez, 1995, "Dynamic Programming and Pricing of Contingent Claims in an Incomplete Market," SIAM Journal of Control and Optimization, 33, 29-66.
10. Edirisinghe, C., V. Naik, and R. Uppal, 1993, "Optimal Replication of Options with Transactions Costs and Trading Restrictions," Journal of Financial and Quantitative Analysis, 28, 117-138.
11. Flesaker, B., and L. Hughston, 1993, "Contingent Claim Replication in Continuous Time with Transaction Costs," working paper, Merrill Lynch, New York.
12. Grossman, S., and J.-L. Vila, 1992, "Optimal Dynamic Trading with Leverage Constraints," Journal of Financial and Quantitative Analysis, 27, 151-168.
13. Karatzas, I., and S. Kou, 1996, "On the Pricing of Contingent Claims Under Constraints," Annals of Applied Probability, 6, 321-369.
14. Karatzas, I., and S. Kou, 1998, "Hedging American Contingent Claims with Constrained Portfolios," working paper, Columbia University; forthcoming in Finance and Stochastics.
15. Leland, H., 1985, "Option Pricing and Replication with Transactions Costs," Journal of Finance, 40, 1283-1301.
16. Margrabe, W., 1978, "The Value of an Option to Exchange One Asset for Another," Journal of Finance, 33, 177-186.
17. Marín, J., and J. Olivier, 1996, "On the Impact of Leverage Constraints on Asset Prices and Trading Volume," working paper, University of Pennsylvania.
18. Merton, R., 1973, "Theory of Rational Option Pricing," Bell Journal of Economics and Management Science, 4, 141-183.
19. Musiela, M., and M. Rutkowski, 1997, Martingale Methods in Financial Modeling, Springer, Berlin.
20. Naik, V., and R. Uppal, 1994, "Leverage Constraints and the Optimal Hedging of Stock and Bond Options," Journal of Financial and Quantitative Analysis, 29, 199-222.
21. Oksendal, B., 1992, Stochastic Differential Equations An Introduction with Applications (3d ed.), Springer, Berlin.
22. Rockafellar, R. T., 1970, Convex Analysis, Princeton University Press, Princeton, N.J.
23. Rutkowski, M., 1996, "Optimality of Replicating Strategies in the CRR Model with Proportional Transaction Costs," working paper, Institute of Mathematics, Warszawa, Poland.
24. Soner, M. H., S. E. Shreve, and J. Cvitanić, 1995, "There is No Nontrivial Hedging Portfolio for Option Pricing with Transaction Costs," Annals of Applied Probability, 5, 327-355.
25. Wilmott, P., J. Dewynne, and S. Howison, 1993, Option Pricing. Mathematical Models and Computation, Oxford Financial Press, Oxford, England.
26. Wystup U., 1997, Valuation of Exotic Options under Shortselling Constraints as a Singular Stochastic Control Problem, Ph.D. dissertation, Carnegie Mellon University.