Kabanov, Yuri M.; (*), Mher M. Safarian - In: Finance and Stochastics 1 (1997) 3, pp. 239-250
We compute the limiting hedging error of the Leland strategy for the approximate pricing of the European call option in a market with transactions costs. It is not equal to zero in the case when the level of transactions costs is a constant, in contradiction with the claim in Leland (1985).