Work

Explicit Recursive Construction of Super-Replication Prices under Proportional Transaction Costs

Year: 2025

Type: preprint

Abstract: We propose a constructive framework for the super-hedging problem of a European contingent claim under proportional transaction costs in discrete time. Our main contribution is an explicit recursive scheme that computes both the super-hedging price and the corresponding optimal strategy without relying on martingale arguments. The method is based on convex duality and a distorted Legendre--Fenchel transform, ensuring both tractability and convexity of the value functions. A numerical implementation on real market data illustrates the practical relevance of the proposed approach.

Source: RePEc: Research Papers in Economics

DOI: 10.48550/arxiv.2503.02419

Authors: Lepinette, Emmanuel, Omrani, Amal

Institution: Centre de Recherche en Mathématiques de la Décision

Language: English

Topic: Stochastic processes and financial applications

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W4416008767

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