ISSN:
1467-9965
Source:
Blackwell Publishing Journal Backfiles 1879-2005
Topics:
Mathematics
,
Economics
Notes:
The observed discrepancies of derivative prices from their theoretical, arbitrage-free values are examined in the presence of transaction costs. Analytic upper and lower bounds on the reservation write and purchase prices, respectively, are obtained when an investor's preferences exhibit constant relative risk aversion between zero and one. The economy consists of multiple primary securities with stationary returns, a constant rate of interest, and any number of American or European derivatives with, possibly, path-dependent arbitrary payoffs.
Type of Medium:
Electronic Resource
URL:
http://dx.doi.org/10.1111/1467-9965.00118