Related papers: Super-replication with transaction costs under mod…
We consider the super-hedging price of an American option in a discrete-time market in which stocks are available for dynamic trading and European options are available for static trading. We show that the super-hedging price $\pi$ is given…
Model uncertainty is a type of inevitable financial risk. Mistakes on the choice of pricing model may cause great financial losses. In this paper we investigate financial markets with mean-volatility uncertainty. Models for stock markets…
This paper studies the equilibrium price of an asset that is traded in continuous time between N agents who have heterogeneous beliefs about the state process underlying the asset's payoff. We propose a tractable model where agents maximize…
In the frictionless discrete time financial market of Bouchard et al.(2015) we consider a trader who, due to regulatory requirements or internal risk management reasons, is required to hedge a claim $\xi$ in a risk-conservative way relative…
We solve the problem of super-hedging European or Asian options for discrete-time financial market models where executable prices are uncertain. The risky asset prices are not described by single-valued processes but measurable selections…
We solve the superhedging problem for European options in an illiquid extension of the Black-Scholes model, in which transactions have transient price impact and the costs and the strategies for hedging are affected by physical or cash…
In this paper we introduce a sublinear conditional expectation with respect to a family of possibly nondominated probability measures on a progressively enlarged filtration. In this way, we extend the classic reduced-form setting for credit…
Dynamic hedging of an European option under a general local volatility model with small linear transaction costs is studied. A continuous control version of Leland's strategy that asymptotically replicates the payoff is constructed. An…
This paper formulates a model of utility for a continuous time framework that captures the decision-maker's concern with ambiguity about both volatility and drift. Corresponding extensions of some basic results in asset pricing theory are…
This paper deals with the super-replication of non path-dependent European claims under additional convex constraints on the number of shares held in the portfolio. The corresponding super-replication price of a given claim has been widely…
We show that when the price process $S$ represents a fully incomplete market, the optimal super-replication of any Markovian claim $g(S_T)$ with $g(\cdot)$ being nonnegative and lower semicontinuous is of buy-and-hold type. Since both…
We consider the fundamental theorem of asset pricing (FTAP) and hedging prices of options under non-dominated model uncertainty and portfolio constrains in discrete time. We first show that no arbitrage holds if and only if there exists…
We provide a model-free pricing-hedging duality in continuous time. For a frictionless market consisting of $d$ risky assets with continuous price trajectories, we show that the purely analytic problem of finding the minimal superhedging…
This paper formulates an utility indifference pricing model for investors trading in a discrete time financial market under non-dominated model uncertainty. The investors preferences are described by strictly increasing concave random…
We study the problem of option replication under constant proportional transaction costs in models where stochastic volatility and jumps are combined to capture the market's important features. Assuming some mild condition on the jump size…
In this note, we consider a general discrete time financial market with proportional transaction costs as in Kabanov and Stricker (2001), Kabanov et al. (2002), Kabanov et al. (2003) and Schachermayer (2004). We provide a dual formulation…
We prove a version of First Fundamental Theorem of Asset Pricing under transaction costs for discrete-time markets with dividend-paying securities. Specifically, we show that the no-arbitrage condition under the efficient friction…
A standing assumption in the literature on proportional transaction costs is efficient friction. Together with robust no free lunch with vanishing risk, it rules out strategies of infinite variation, as they usually appear in frictionless…
In this paper, we study the pricing of contingent claims under G-expectation. In order to accomodate volatility uncertainty, the price of the risky security is supposed to governed by a general linear stochastic differential equation (SDE)…
In a financial market with a continuous price process and proportional transaction costs we investigate the problem of utility maximization of terminal wealth. We give sufficient conditions for the existence of a shadow price process,…