Date: Thursday, February 02, 2012
Location: 1360 East Hall (3:00 PM to 4:00 PM)
Title: Limit Theorems for Partial Hedging under Transaction Costs
Abstract: We study shortfall risk minimization for American options with path dependent payoffs under proportional transaction costs in the Black--Scholes (BS) model.
We show that for this case the shortfall risk is a limit of similar terms in an appropriate sequence of binomial models. Furthermore, we use the binomial models in order to construct an "almost" optimal hedges for the BS model. We also
prove that in the continuous time BS model, there exists a portfolio strategy which minimizes the shortfall risk.
Speaker: Yan Dolinsky
Institution: ETH
Event Organizer: Erhan Bayraktar erhan@umich.edu
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