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Int. J. Financial Stud. 2015, 3(2), 102-135; doi:10.3390/ijfs3020102

On Transaction-Cost Models in Continuous-Time Markets

Department of Economics, Democritus University of Thrace, Panepistimioupolis, Komotini 69100, Greece
Academic Editor: Nicholas Apergis
Received: 5 September 2014 / Revised: 11 March 2015 / Accepted: 7 April 2015 / Published: 24 April 2015
(This article belongs to the Special Issue Recent Developments in Finance and Banking after the 2008 Crisis)
View Full-Text   |   Download PDF [440 KB, uploaded 24 April 2015]   |  

Abstract

Transaction-cost models in continuous-time markets are considered. Given that investors decide to buy or sell at certain time instants, we study the existence of trading strategies that reach a certain final wealth level in continuous-time markets, under the assumption that transaction costs, built in certain recommended ways, have to be paid. Markets prove to behave in manners that resemble those of complete ones for a wide variety of transaction-cost types. The results are important, but not exclusively, for the pricing of options with transaction costs. View Full-Text
Keywords: risky asset; transaction costs; weakly complete markets; continuous-time markets; cost function; option pricing risky asset; transaction costs; weakly complete markets; continuous-time markets; cost function; option pricing
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).

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Poufinas, T. On Transaction-Cost Models in Continuous-Time Markets. Int. J. Financial Stud. 2015, 3, 102-135.

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