The space of outcomes of semi-static trading strategies need not be closed

DOI10.1007/S00780-017-0329-3zbMATH Open1416.91410arXiv1606.00631OpenAlexW2419491292MaRDI QIDQ2364534FDOQ2364534

Authors: Martin Larsson, B. Acciaio, Walter Schachermayer 

Publication date: 21 July 2017

Published in: Finance and Stochastics (Search for Journal in Brave)

Abstract: Semi-static trading strategies make frequent appearances in mathematical finance, where dynamic trading in a liquid asset is combined with static buy-and-hold positions in options on that asset. We show that the space of outcomes of such strategies can have very poor closure properties when all European options for a fixed date $T$ are available for static trading. This causes problems for optimal investment, and stands in sharp contrast to the purely dynamic case classically considered in mathematical finance.

Full work available at URL: https://arxiv.org/abs/1606.00631

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zbMATH Keywords

semi-static trading strategiessemi-static completenesssemi-static replication

Mathematics Subject Classification ID

Derivative securities (option pricing, hedging, etc.) (91G20) Martingales with continuous parameter (60G44) Actuarial science and mathematical finance (91G99)

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Cited In (5)

• On intermediate marginals in martingale optimal transportation
• A pointwise bipolar theorem
• On the support of extremal martingale measures with given marginals: the countable case
• Limits of semistatic trading strategies
• Martingale Schrödinger bridges and optimal semistatic portfolios

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