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Hedging and liquidation under transaction costs in currency markets

Author

Listed:
  • Y.M. Kabanov

    (Laboratoire de MathÊmatiques, UniversitÊ de Franche-ComtÊ, 16 Route de Gray, F-25030 BesanÚon Cedex, France)

Abstract

We consider a general semimartingale model of a currency market with transaction costs and give a description of the initial endowments which allow to hedge a contingent claim in various currencies by a self-financing portfolio. As an application we obtain a result on the structure of optimal strategies for the problem of maximizing expected utility from terminal wealth.

Suggested Citation

  • Y.M. Kabanov, 1999. "Hedging and liquidation under transaction costs in currency markets," Finance and Stochastics, Springer, vol. 3(2), pages 237-248.
    • Handle: RePEc:spr:finsto:v:3:y:1999:i:2:p:237-248
    Note: received: December 1996; final version received: June 1998
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