Self-dual continuous processes (Q1947605): Difference between revisions
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English | Self-dual continuous processes |
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Self-dual continuous processes (English)
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22 April 2013
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A hedging strategy is called semi-static when trading takes place at inception and at a finite number of stopping times, e.g. hitting times of barriers. It is well known by now that one can semi-statically hedge path-dependent derivatives, e.g. barrier options, using European options. However, in order to implement this strategy the asset price process should satisfy a certain symmetry property known as self-duality. This paper is devoted to the study of stochastic processes with continuous paths that are self-dual. In particular, the authors provide a structural characterization of continuous semimartingales that are conditionally (quasi) self-dual. Moreover, they prove that a continuous martingale is an Ocone martingale if and only if its stochastic exponential is strongly self-dual.
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continuous semimartignales
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self-dual processes
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Ocone martingales
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semi-static hedging
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