Abstract
The paper shows that in the presence of transaction costs, there exists a viable price system in which the price of a call option is arbitrarily close to the price of the stock (minus the bid-ask spread on the stock and the option). The construction of such an example is possible no matter how small is the volatility of the stock or how small are the transaction costs.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.