Martingale optimal transport and robust hedging in continuous time (Q466902)

From MaRDI portal
scientific article
Language Label Description Also known as
English
Martingale optimal transport and robust hedging in continuous time
scientific article

    Statements

    Martingale optimal transport and robust hedging in continuous time (English)
    0 references
    0 references
    0 references
    31 October 2014
    0 references
    The authors prove the duality between the robust hedging of path dependent European options and the martingale optimal transport problem. The authors consider a financial market, which consists of a saving account normalized to unity \(B_t\equiv 1\) and of a risky asset \(S_t,\;t\in [0,T]\), where \(T<\infty\) is the maturity date and \(S_t\) is only assumed to be a continuous function of time. The hedging problem is to construct a minimal super-hedging portfolio that consists of dynamically trading the underlying risky asset and a static position of vanilla options which can be expressed at the given fixed maturity. The dual is a Monge-Kantorovich type martingale transport problem of maximizing the expected value of the option over all martingale measures, that have a given marginal at maturity. The authors present also a family of piecewise constant super-replication portfolios that asymptotically achieve the minimal super-replication cost.
    0 references
    0 references
    European options
    0 references
    robust hedging
    0 references
    min-max theorems
    0 references
    Prokhorov metric
    0 references
    optimal transport
    0 references
    0 references
    0 references
    0 references
    0 references
    0 references

    Identifiers