We study super-replication of contingent claims in markets with fixed transaction costs.  The first result in this paper reveals that in reasonable continuous time financial market  the super--replication price is prohibitively costly and leads to trivial buy--and--hold strategies. Our second result is derives non trivial scaling limits of super--replication prices in the binomial models with small fixed costs.
We study super--replication of contingent claims in markets with fixed transaction costs. This can be viewed as a stochastic impulse control problem with a terminal state constraint. The first result in this paper reveals that in reasonable continuous time financial market models the super--replication price is prohibitively costly and leads to trivial buy--and--hold strategies. Our second result derives nontrivial scaling limits of super--replication prices for binomial models with small fixed costs.
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