Super-replication with fixed transaction costs

Peter Bank, Yan Dolinsky

Research output: Contribution to journalArticlepeer-review

2 Scopus citations


We study super-replication of contingent claims in markets with fixed transaction costs. This can be viewed as a stochastic impulse control problem with a terminal state constraint. The first result in this paper reveals that in reasonable continuous time financial market models the super-replication price is prohibitively costly and leads to trivial buy-and-hold strategies. Our second result derives nontrivial scaling limits of super-replication prices for binomial models with small fixed costs.

Original languageAmerican English
Pages (from-to)739-757
Number of pages19
JournalAnnals of Applied Probability
Issue number2
StatePublished - Apr 2019

Bibliographical note

Publisher Copyright:
© Institute of Mathematical Statistics, 2019.


  • Binomial models
  • Conditional full support
  • Fixed transaction costs
  • Superreplication


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