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arXiv · 1407.5877

Linear vector optimization and European option pricing under proportional transaction costs

Alet Roux·Tomasz Zastawniak
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Abstract

A method for pricing and superhedging European options under proportional transaction costs based on linear vector optimisation and geometric duality developed by Lohne & Rudloff (2014) is compared to a special case of the algorithms for American type derivatives due to Roux & Zastawniak (2014). An equivalence between these two approaches is established by means of a general result linking the support function of the upper image of a linear vector optimisation problem with the lower image of the dual linear optimisation problem.

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Alet Roux, Tomasz Zastawniak. 2014-07-22. Linear vector optimization and European option pricing under proportional transaction costs. https://arxiv.org/abs/1407.5877

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