On Leland's strategy of option pricing with transactions costs

We compute the limiting hedging error of the Leland strategy for the approximate pricing of the European call option in a market with transactions costs. It is not equal to zero in the case when the level of transactions costs is a constant, in contradiction with the claim in Leland (1985).

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Year of publication:	1997
Authors:	Kabanov, Yuri M. ; (*), Mher M. Safarian
Published in:	Finance and Stochastics. - Springer. - Vol. 1.1997, 3, p. 239-250
Publisher:	Springer
Subject:	Transactions costs \| asymptotic hedging \| call option \| Black-Scholes formula

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Extent:	application/pdf application/postscript
Type of publication:	Article
Notes:	received: February 1996; final version received: October 1996
Classification:	G13 - Contingent Pricing; Futures Pricing
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005390670