An Explicit Martingale Version of Brenier's Theorem

arXiv1302.4854MaRDI QIDQ6239769FDOQ6239769

Nizar Touzi, Pierre Henry-Labordère

Publication date: 20 February 2013

Abstract: By investigating model-independent bounds for exotic options in financial mathematics, a martingale version of the Monge-Kantorovich mass transport problem was introduced in cite{BeiglbockHenry LaborderePenkner,GalichonHenry-LabordereTouzi}. In this paper, we extend the one-dimensional Brenier's theorem to the present martingale version. We provide the explicit martingale optimal transference plans for a remarkable class of coupling functions corresponding to the lower and upper bounds. These explicit extremal probability measures coincide with the unique left and right monotone martingale transference plans, which were introduced in cite{BeiglbockJuillet} by suitable adaptation of the notion of cyclic monotonicity. Instead, our approach relies heavily on the (weak) duality result stated in cite{BeiglbockHenry-LaborderePenkner}, and provides, as a by-product, an explicit expression for the corresponding optimal semi-static hedging strategies. We finally provide an extension to the multiple marginals case.

This page was built for publication: An Explicit Martingale Version of Brenier's Theorem

Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q6239769)