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Portfolio selection at proportional transaction costs. (Chinese. English summary) Zbl 1199.91191

Summary: The martingale approach is introduced to solve the problem of optimal portfolio in complete markets. Consideration transaction costs and trading restrictions, a conditional delta hedging model is proposed to replicate the option. By minimizing the absolute replication error, the optimal hedging volatility is yielded, namely the adjusted volatility, and then this adjusted volatility is integrated to achieve the optimal portfolio. The method relies on Monte Carlo simulations.

MSC:

91G10 Portfolio theory
91G60 Numerical methods (including Monte Carlo methods)
65C05 Monte Carlo methods
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