We study partial hedging for game options in markets with transaction costs bounded from below. More precisely, we assume that the investor's transaction costs for each trade are the minimum between proportional transaction costs and a fixed transaction costs. We prove that in the continuous time Black--Scholes (BS) model, there exists a trading strategy which minimizes the shortfall risk. Furthermore, the trading strategy is given by a dynamical programming algorithm .
We study partial hedging for game options in markets with transaction costs bounded from below. More precisely, we assume that the investor's transaction costs for each trade are the maximum between proportional transaction costs and a fixed transaction costs. We prove that in the continuous time Black--Scholes (BS) model, there exists a trading strategy which minimizes the shortfall risk. Furthermore, we use binomial models in order to provide numerical schemes for the calculation of the shortfall risk and the corresponding optimal portfolio in the BS model .
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the trading strategy is given by a dynamical programming algorithm
we use binomial models in order to provide numerical schemes for the calculation of the shortfall risk and the corresponding optimal portfolio in the BS model