An integer programming model for pricing American contingent claims under transaction costs

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dc.citation.epage12en_US
dc.citation.issueNumber1en_US
dc.citation.spage1en_US
dc.citation.volumeNumber39en_US
dc.contributor.authorPınar, M. Ç.en_US
dc.contributor.authorCamcı, A.en_US
dc.date.accessioned2016-02-08T09:49:09Z
dc.date.available2016-02-08T09:49:09Z
dc.date.issued2012en_US
dc.departmentDepartment of Industrial Engineeringen_US
dc.description.abstractWe study the problem of computing the lower hedging price of an American contingent claim in a finite-state discrete-time market setting under proportional transaction costs. We derive a new mixed-integer linear programming formulation for calculating the lower hedging price. The linear programming relaxation of the formulation is exact in frictionless markets. Our results imply that it might be optimal for the holder of several identical American claims to exercise portions of the portfolio at different time points in the presence of proportional transaction costs while this incentive disappears in their absence.en_US
dc.description.provenanceMade available in DSpace on 2016-02-08T09:49:09Z (GMT). No. of bitstreams: 1 bilkent-research-paper.pdf: 70227 bytes, checksum: 26e812c6f5156f83f0e77b261a471b5a (MD5) Previous issue date: 2012en
dc.identifier.doi10.1007/s10614-010-9209-zen_US
dc.identifier.eissn1572-9974
dc.identifier.issn0927-7099
dc.identifier.urihttp://hdl.handle.net/11693/21640
dc.language.isoEnglishen_US
dc.relation.isversionofhttp://dx.doi.org/10.1007/s10614-010-9209-zen_US
dc.source.titleComputational Economicsen_US
dc.subjectAmerican Contingent Claimsen_US
dc.subjectDividendsen_US
dc.subjectHedgingen_US
dc.subjectIncomplete Marketsen_US
dc.subjectMartingalesen_US
dc.subjectMixed-integer Programmingen_US
dc.subjectPricingen_US
dc.subjectTransaction Costsen_US
dc.titleAn integer programming model for pricing American contingent claims under transaction costsen_US
dc.typeArticleen_US

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