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Black and Scholes pricing and markets with transaction costs: An example

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Abstract.

The paper shows that in the presence of transaction costs, there exists a viable price system in which prices of call options are arbitrarily close to the price of the stock. The construction of such an example is possible no matter how small the volatility of the stock or how small the transaction costs.

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Authors and Affiliations

  1. Davidson School of Management, Technion–Israel Institute of Technology, Haifa 32000, Israel (e-mail: reisman@ie.technion.ac.il), , , , , , IL

    Haim Reisman

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  1. Haim Reisman
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Additional information

Manuscript received: June 2000; final version received: January 2001

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Reisman, H. Black and Scholes pricing and markets with transaction costs: An example. Finance Stochast 5, 549–555 (2001). https://doi.org/10.1007/s007800100045

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  • DOI: https://doi.org/10.1007/s007800100045