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# Hedge Pricing

In this section, we include the effect of trading fees on risk-neutral pricing, which we will denote with the variable
$c$
.
using
$\phi_k$
to denote the proportion of the hedge purchased for a given strike in a given epoch, the return for "selling" it can be shown as
$APR_k=12\times\left(\frac{1-c}{1-\phi_k}\right),$
and in order for a no-arbitrage environment, we must have the relation
$P_k=\frac{\phi_k}{1-c}.$
It should be noted that although the APR for selling a hedge may seem quite high, there is always a probability
$P_k$
of the seller's entire position being liquidated.