Optimal Trading Using Black-Scholes Equation with Transaction Costs

Joy Ijeoma Adindu-Dick

doi:10.52589/AJMSS-BMQHWDX1

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Optimal Trading Using Black-Scholes Equation with Transaction Costs

Publication Date: 2022-04-28

DOI: 10.52589/AJMSS-BMQHWDX1

Volume/Issue: Volume 5, Issue 2 (2022)

Page No: 1 - 9

Journal: African Journal of Mathematics and Statistics Studies

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Abstract:

This work deals with optimal trading using Black-Scholes equation with transaction costs. The partial differential equation for option pricing with transaction costs on the domain (P,T)∈(0,∞)×(0,T) with terminal condition C(P,T)=Max(P-E,0),P∈(0,∞) for European call options with strike price, E, and a suitable terminal condition for European puts was obtained and then solved to obtain the optimal value function.

Keywords:Black-Scholes equation with transaction costsOptimal tradingOption pricingEuropean call and put optionsPortfolio of options.

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All articles are published open access under the Creative Commons Attribution 4.0 International (CC BY 4.0) licence, which permits use, sharing, adaptation, distribution, and reproduction in any medium or format, including for commercial purposes, provided appropriate credit is given to the original author(s) and source.

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Copyrights

Authors retain copyright in their articles and have unrestricted rights to reuse, republish, archive, share, and distribute their work after publication.
All articles are published open access under the Creative Commons Attribution 4.0 International (CC BY 4.0) licence, which permits use, sharing, adaptation, distribution, and reproduction in any medium or format, including for commercial purposes, provided appropriate credit is given to the original author(s) and source.