Pathwise super-replication via Vovk's outer measure
Mathematical Finance
2018-11-15 v2 Probability
Pricing of Securities
Abstract
Since Hobson's seminal paper [D. Hobson: Robust hedging of the lookback option. In: Finance Stoch. (1998)] the connection between model-independent pricing and the Skorokhod embedding problem has been a driving force in robust finance. We establish a general pricing-hedging duality for financial derivatives which are susceptible to the Skorokhod approach. Using Vovk's approach to mathematical finance we derive a model-independent super-replication theorem in continuous time, given information on finitely many marginals. Our result covers a broad range of exotic derivatives, including lookback options, discretely monitored Asian options, and options on realized variance.
Keywords
Cite
@article{arxiv.1504.03644,
title = {Pathwise super-replication via Vovk's outer measure},
author = {Mathias Beiglböck and Alexander M. G. Cox and Martin Huesmann and Nicolas Perkowski and David J. Prömel},
journal= {arXiv preprint arXiv:1504.03644},
year = {2018}
}
Comments
18 pages