Option pricing and replication with transaction costs and dividends

By Stylianos Perrakis, J. Lefoll. 2000

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Stochastic Dominance Bounds on American Option Prices in Markets with Frictions (2007, methodology): “(1992) and the approximate replication method of Leland (1985) and to the extension of these bounds to American options by Perrakis and Lefoll (2000, 2004).”
Pricing methods and hedging strategies for volatility derivatives (2006, methodology): “However, when actual returns are specified the gamma, VSS , is always positive and we can simply use the Leland volatility correction [15]:”
Numerical Methods for Nonlinear PDEs in Finance (2012, background): “It should also be pointed out that a PDE of precisely the same form as (2) arises in the completely different context of option valuation under transaction costs [17].”
Price Functionals with Bid-Ask Spreads: An Axiomatic Approach (2000, background): “If we further assume that the transaction costs go to zero as the square root of N , Leland (1985) claims then that the replication price for a call option converges to the Black and Scholes price of this option in a model without transaction costs but with a correctly modi ed volatility for the…”