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,...

The optimal portfolio of a utility-maximizing investor trading in the S&P 500 index and cash, subject to proportional transaction costs, becomes stochastically dominated when overlaid with a zero-net-cost portfolio of S&P 500 options bought at their ask and written at their bid price in most...

I introduce dynamic option trading and non-linear views into the classical portfolio selection problem. The optimal dynamic option portfolio is characterized explicitly in terms of its expected sensitivities (Greeks) and the role of the mean-variance effi cient portfolio is played by the "Greek...

We propose a new approach to the pricing and hedging of contingent claims under transaction costs in a general incomplete market in discrete time. Under the assumptions of a bounded mean-variance tradeoff, substantial risk and a nondegeneracy condition on the conditional variances of asset...

We consider a consumption-investment optimization problem for the Kabanov model when the proportional transaction costs rate is constant and the prices are modeled by a Lévy process. We naturally extend the preliminary work of [4] to portfolio processes that are only supposed to be làdlàg....

This supplemental appendix accompanies "Optimal Investment with Transaction Costs and Stochastic Volatility Part II: Finite Horizon" by the same authors, available at:"http://ssrn.com/abstract=2659918" http://ssrn.com/abstract=2659918. In this appendix we prove the verification theorem that the...

In 1985 Leland suggested an approach to price contingent claims under proportional transaction costs. Its main idea is to use the classical Black–Scholes formula with a suitably enlarged volatility for a periodically revised portfolio whose terminal value approximates the pay-off of the call...

In this companion paper to “Optimal Investment with Transaction Costs and Stochastic Volatility Part I: Infinite Horizon”, "http://ssrn.com/abstract=2374150" http://ssrn.com/abstract=2374150, we give an accuracy proof for the finite time optimal investment and consumption problem under fast...

The problem studied is the pricing of options on the CBOE Skew index. The option pricing theory developed seeks to hedge the risk using positions in the market for options on a related asset and the option is then priced at the cost of this hedge. The theory is applied to pricing VIX options...