This paper highlights a framework for analysing dynamic hedging strategies under transaction costs. First, self-financing portfolio dynamics under transaction costs are modelled as being portfolio affine. An algorithm for computing the moments of the hedging error on a lattice under portfolio...

Given exogenously the price process of some assets, we constrain the price process of other assets, which are characterized by their final pay-offs. We deal with an incomplete market framework in a discrete time model and assume the existence of the equilibrium. In this setup, we derive...