| Article ID: | iaor19992959 |
| Country: | Netherlands |
| Volume: | 108 |
| Issue: | 1 |
| Start Page Number: | 184 |
| End Page Number: | 195 |
| Publication Date: | Jul 1998 |
| Journal: | European Journal of Operational Research |
| Authors: | stermark Ralf |
| Keywords: | option pricing |
In this paper we incorporate multiple transactions costs in the option pricing formula of Black and Scholes. The effect of introducing economic friction in the equilibrium equation is studied and summarized in some central propositions. The analysis provides part of the results needed for capturing the economic effects of transactions costs in the pricing process.