Change of numeraire in the two-marginals martingale transport problem

DOI10.1007/S00780-016-0322-2zbMATH Open1369.91174DBLPjournals/fs/CampiLM17arXiv1406.6951OpenAlexW1537865873WikidataQ59603443 ScholiaQ59603443MaRDI QIDQ522059FDOQ522059

Authors: Luciano Campi, Ismail Laachir, Claude Martini 

Publication date: 13 April 2017

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

Abstract: In this paper we apply change of numeraire techniques to the optimal transport approach for computing model-free prices of derivatives in a two periods model. In particular, we consider the optimal transport plan constructed in cite{HobsonKlimmek2013} as well as the one introduced in cite{BeiglJuil} and further studied in cite{BrenierMartingale}. We show that, in the case of positive martingales, a suitable change of numeraire applied to cite{HobsonKlimmek2013} exchanges forward start straddles of type I and type II, so that the optimal transport plan in the subhedging problems is the same for both types of options. Moreover, for cite{BrenierMartingale}'s construction, the right monotone transference plan can be viewed as a mirror coupling of its left counterpart under the change of numeraire. An application to stochastic volatility models is also provided.

Full work available at URL: https://arxiv.org/abs/1406.6951

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zbMATH Keywords

optimal transportmodel uncertaintymodel-independent pricingchange of numerairerobust hedgingforward start straddle

Mathematics Subject Classification ID

Derivative securities (option pricing, hedging, etc.) (91G20) Variational problems in a geometric measure-theoretic setting (49Q20) Martingales with continuous parameter (60G44)

Cites Work

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Cited In (24)

• Convex order, quantization and monotone approximations of ARCH models
• A construction of the left-curtain coupling
• The geometry of multi-marginal Skorokhod embedding
• Compactness criterion for semimartingale laws and semimartingale optimal transport
• All adapted topologies are equal
• Canonical supermartingale couplings
• Monotonicity preserving transformations of MOT and SEP
• Shadow couplings
• Robust bounds for derivative prices in Markovian models
• Supermartingale shadow couplings: the decreasing case
• Monotone martingale transport plans and Skorokhod embedding
• A potential-based construction of the increasing supermartingale coupling
• Tightening robust price bounds for exotic derivatives
• No-arbitrage bounds for the forward smile given marginals
• Weak transport for non‐convex costs and model‐independence in a fixed‐income market
• An explicit martingale version of the one-dimensional Brenier's theorem with full marginals constraint
• Adapted Wasserstein distances and stability in mathematical finance
• Girsanov, Numeraires, and All That
• Stability of martingale optimal transport and weak optimal transport
• Geometry of distribution-constrained optimal stopping problems
• Martingale Benamou-Brenier: a probabilistic perspective
• Quantization and martingale couplings
• Dual attainment for the martingale transport problem
• Supermartingale Brenier's theorem with full-marginals constraint

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