search query: @author Hauser, S. / total: 5
reference: 4 / 5
| Author: | Hauser, S. Levy, A. |
| Title: | Pricing of foreign exchange options with transaction costs: the choice of trading interval |
| Journal: | International Review of Financial Analysis
1996 : VOL. 5:2, p. 145-160 |
| Index terms: | FINANCIAL ANALYSIS TRANSACTION COSTS FOREIGN EXCHANGE |
| Language: | eng |
| Abstract: | In this paper, the authors develop an arbitrage-free option valuation model in the presence of transaction costs. The model considers the trade-off between the choice of lowering costs by trading less often and the choice of reducing the hedging errors by trading more often. This trade-off allows derivation of a trading interval policy. The authors illustrate the model with actual transactions data and offer a procedure for the estimation of a trading interval that minimizes hedging errors and transaction costs. |
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