caa a22 4500 463187555 CHVBK 20180406164858.0 cr unu---uuuuu 170326e20070101xx s 000 0 eng 10.1007/s11156-006-0005-8 doi (NATIONALLICENCE)springer-10.1007/s11156-006-0005-8 Chidambaran N. Rutgers Business School, Newark & New Brunswick, Rutgers University, 07102, Newark, NJ, USA aut Density estimation through quasi-analytic Monte-Carlo simulation: Options arbitrage with transactions costs [Elektronische Daten] [N. Chidambaran] Discretely rebalanced options arbitrage strategies in the presence of transaction costs have path dependent returns that are difficult to model analytically. I instead use a quasi-analytic procedure that combines the computational efficiency of analytical solutions with the flexibility of simulations. The central feature is the estimation of the distribution of returns of the arbitrage strategy by mapping simulated returns percentiles and the input parameter set. Using the estimated density, I evaluate the tradeoff between transaction costs and risk exposure under generalized transaction costs structures that includes bid-ask spread and brokerage commission. I show that the optimal strategy depends on transaction costs, volatility, and option moneyness. Strategies such as rebalancing when the hedge ratio changes by 0.25, balances transaction costs and risk exposure, and can be optimal. Springer Science+Business Media, LLC, 2006 Rebalancing nationallicence Discrete nationallicence Frequency nationallicence Options arbitrage nationallicence Density estimation nationallicence Transactions cost nationallicence Review of Quantitative Finance and Accounting Kluwer Academic Publishers-Plenum Publishers; http://www.springer-ny.com 28/1(2007-01-01), 101-122 0924-865X 28:1<101 2007 28 11156 https://doi.org/10.1007/s11156-006-0005-8 text/html Onlinezugriff via DOI 1 research-article jats NATIONALLICENCE 856 40 https://doi.org/10.1007/s11156-006-0005-8 text/html Onlinezugriff via DOI NATIONALLICENCE 100 1- Chidambaran N. Rutgers Business School, Newark & New Brunswick, Rutgers University, 07102, Newark, NJ, USA aut NATIONALLICENCE 773 0- Review of Quantitative Finance and Accounting Kluwer Academic Publishers-Plenum Publishers; http://www.springer-ny.com 28/1(2007-01-01), 101-122 0924-865X 28:1<101 2007 28 11156 Metadata rights reserved Springer special CC-BY-NC licence nationallicence BK010053 XK010053 XK010000 NATIONALLICENCE NATIONALLICENCE NL-springer