TY - JOUR
TI - An algorithm for calculating the set of superhedging portfolios in markets with transaction costs
AB - We study the explicit calculation of the set of superhedging portfolios of contingent claims in a discrete-time market model for d assets with proportional transaction costs. The set of superhedging portfolios can be obtained by a recursive construction involving set operations, going backward in the event tree. We reformulate the problem as a sequence of linear vector optimization problems and solve it by adapting known algorithms. The corresponding superhedging strategy can be obtained going forward in the tree. Examples are given involving multiple correlated assets and basket options. Furthermore, we relate existing algorithms for the calculation of the scalar superhedging price to the set-valued algorithm by a recent duality theory for vector optimization problems. The main contribution of the paper is to establish the connection to linear vector optimization, which allows to solve numerically multi-asset superhedging problems under transaction costs.
DO - http://dx.doi.org/10.1142/S0219024914500125
SP - 1450012
EP - [33 p]
UR - http://arxiv.org/pdf/1107.5720
PY - 2014-01-01
JO - International Journal of Theoretical and Applied Finance
AU - LĂ¶hne, Andreas
AU - Rudloff, Birgit
ER -