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Limit theorem for Leland’s strategy. (English) Zbl 1091.91039

Summary: The Leland strategy for an approximate hedging of the call option under transactions costs is studied. The rate of convergence in the Kabanov-Safarian theorem for the Leland strategy is found. The limit theorem for the hedging portfolio is proved.

MSC:

91G20 Derivative securities (option pricing, hedging, etc.)
60H05 Stochastic integrals
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