Robust Pricing and Hedging around the Globe

Sebastian Herrmann; Florian Stebegg

doi:10.1214/19-AAP1482

Robust Pricing and Hedging around the Globe

Sebastian Herrmann, Florian Stebegg

Probability

Research output: Contribution to journal › Article › peer-review

Abstract

We consider the martingale optimal transport duality for càdlàg processes with given initial and terminal laws. Strong duality and existence of dual optimizers (robust semi-static superhedging strategies) are proved for a class of payoffs that includes American, Asian, Bermudan, and European options with intermediate maturity. We exhibit an optimal superhedging strategy for which the static part solves an auxiliary problem and the dynamic part is given explicitly in terms of the static part.

Original language	English
Pages (from-to)	3348 - 3386
Journal	Annals of Applied Probability
Volume	29
Issue number	6
Early online date	15 Oct 2019
DOIs	https://doi.org/10.1214/19-AAP1482
Publication status	Published - 15 Oct 2019

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10.1214/19-AAP1482

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AAP1709-007R1A0
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Cite this

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title = "Robust Pricing and Hedging around the Globe",

abstract = "We consider the martingale optimal transport duality for c{\`a}dl{\`a}g processes with given initial and terminal laws. Strong duality and existence of dual optimizers (robust semi-static superhedging strategies) are proved for a class of payoffs that includes American, Asian, Bermudan, and European options with intermediate maturity. We exhibit an optimal superhedging strategy for which the static part solves an auxiliary problem and the dynamic part is given explicitly in terms of the static part.",

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AU - Stebegg, Florian

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AB - We consider the martingale optimal transport duality for càdlàg processes with given initial and terminal laws. Strong duality and existence of dual optimizers (robust semi-static superhedging strategies) are proved for a class of payoffs that includes American, Asian, Bermudan, and European options with intermediate maturity. We exhibit an optimal superhedging strategy for which the static part solves an auxiliary problem and the dynamic part is given explicitly in terms of the static part.

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DO - 10.1214/19-AAP1482

M3 - Article

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VL - 29

SP - 3348

EP - 3386

JO - Annals of Applied Probability

JF - Annals of Applied Probability

IS - 6

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Robust Pricing and Hedging around the Globe

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