Model-independent superhedging under portfolio constraints (Q261914): Difference between revisions

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The authors consider a discrete-time financial market where the following can be traded: risky assets (such as stocks), vanilla call options on these assets, as well as other derivatives on them, such as exotic options. They assume that the vanilla calls are liquidly traded, while the liquidity on the exotic options is limited. The authors derive a model-independent super-hedging duality in this setting, where the super-hedging portfolio can be semi-static and consists of three parts: a dynamic trading strategy in the underlying assets and static positions in the vanilla calls and the exotic options. The derivation of the super-hedging duality uses tools from the Monge-Kantorovic optimal transport theory. Moreover, as a consequence of the super-hedging duality, the authors also prove a model-independent version of the fundamental theorem of asset pricing. The framework is general enough to accommodate delta and gamma constraints.
Property / review text: The authors consider a discrete-time financial market where the following can be traded: risky assets (such as stocks), vanilla call options on these assets, as well as other derivatives on them, such as exotic options. They assume that the vanilla calls are liquidly traded, while the liquidity on the exotic options is limited. The authors derive a model-independent super-hedging duality in this setting, where the super-hedging portfolio can be semi-static and consists of three parts: a dynamic trading strategy in the underlying assets and static positions in the vanilla calls and the exotic options. The derivation of the super-hedging duality uses tools from the Monge-Kantorovic optimal transport theory. Moreover, as a consequence of the super-hedging duality, the authors also prove a model-independent version of the fundamental theorem of asset pricing. The framework is general enough to accommodate delta and gamma constraints. / rank
 
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Property / reviewed by
 
Property / reviewed by: Antonis Papapantoleon / rank
 
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Property / Mathematics Subject Classification ID
 
Property / Mathematics Subject Classification ID: 91G20 / rank
 
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Property / Mathematics Subject Classification ID
 
Property / Mathematics Subject Classification ID: 60G44 / rank
 
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Property / Mathematics Subject Classification ID
 
Property / Mathematics Subject Classification ID: 60H30 / rank
 
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Property / zbMATH DE Number
 
Property / zbMATH DE Number: 6560416 / rank
 
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Property / zbMATH Keywords
 
discrete-time financial market
Property / zbMATH Keywords: discrete-time financial market / rank
 
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model-independent super-hedging
Property / zbMATH Keywords: model-independent super-hedging / rank
 
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Property / zbMATH Keywords
 
liquid and non-liquid derivatives
Property / zbMATH Keywords: liquid and non-liquid derivatives / rank
 
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Property / zbMATH Keywords
 
Monge-Kantorovic optimal transport
Property / zbMATH Keywords: Monge-Kantorovic optimal transport / rank
 
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Property / zbMATH Keywords
 
delta and gamma constraints
Property / zbMATH Keywords: delta and gamma constraints / rank
 
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Revision as of 13:36, 27 June 2023

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Model-independent superhedging under portfolio constraints
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    Model-independent superhedging under portfolio constraints (English)
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    29 March 2016
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    The authors consider a discrete-time financial market where the following can be traded: risky assets (such as stocks), vanilla call options on these assets, as well as other derivatives on them, such as exotic options. They assume that the vanilla calls are liquidly traded, while the liquidity on the exotic options is limited. The authors derive a model-independent super-hedging duality in this setting, where the super-hedging portfolio can be semi-static and consists of three parts: a dynamic trading strategy in the underlying assets and static positions in the vanilla calls and the exotic options. The derivation of the super-hedging duality uses tools from the Monge-Kantorovic optimal transport theory. Moreover, as a consequence of the super-hedging duality, the authors also prove a model-independent version of the fundamental theorem of asset pricing. The framework is general enough to accommodate delta and gamma constraints.
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    discrete-time financial market
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    model-independent super-hedging
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    liquid and non-liquid derivatives
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    Monge-Kantorovic optimal transport
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    delta and gamma constraints
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