Abstract:
In a general discrete-time model with proportional transaction costs, we derive a dual representation of the super-replication cost, i.e., the minimal initial amount needed to hedge a contingent claim by means of a self-financing strategy. Such a representation is previously known from [E. Jouini and H. Kallal, J. Econ. Theory, 66 (1995), pp. 178–197], [S. Kusuoka, Ann. Appl. Probab., 5 (1995), pp. 198–221], and [J. Cvitanic and I. Karatzas, Math. Finance, 6 (1996), pp. 133–166] in similar frameworks.