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Option Pricing Model with Transaction Costs

Author

Listed:
  • F. G. Bellora
  • G. Mazzei
  • M. Maurette

Abstract

The author presents alternatives to the Black-Scholes european call option pricing model by incorporating different transaction cost structures in the replicating strategy. In particular, an exponentially decreasing structure is proposed and developed.

Suggested Citation

  • F. G. Bellora & G. Mazzei & M. Maurette, 2021. "Option Pricing Model with Transaction Costs," Papers 2112.10209, arXiv.org.
    • Handle: RePEc:arx:papers:2112.10209
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    References listed on IDEAS

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    1. Leland, Hayne E, 1985. "Option Pricing and Replication with Transactions Costs," Journal of Finance, American Finance Association, vol. 40(5), pages 1283-1301, December.
    2. Boyle, Phelim P. & Emanuel, David, 1980. "Discretely adjusted option hedges," Journal of Financial Economics, Elsevier, vol. 8(3), pages 259-282, September.
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