Model-independent pricing with insider information: A Skorokhod embedding approach

Alexander M. G. Cox, Beatrice Acciaio, Martin Huesmann

Research output: Contribution to journalArticle


In this paper, we consider the pricing and hedging of a financial derivative for an insider trader, in a model-independent setting. In particular, we suppose that the insider wants to act in a way which is independent of any modelling assumptions, but that she observes market information in the form of the prices of vanilla call options on the asset. We also assume that both the insider's information, which takes the form of a set of impossible paths, and the payoff of the derivative are time-invariant. This setup allows us to adapt recent work of Beiglboeck, Cox and Huesmann (2016) to prove duality results and a monotonicity principle, which enables us to determine geometric properties of the optimal models. Moreover, we show that this setup is powerful, in that we are able to find analytic and numerical solutions to certain pricing and hedging problems.
Original languageEnglish
JournalAdvances in Applied Probability
Issue number1
Publication statusAcceptance date - 26 Jun 2020


  • q-fin.MF
  • math.PR
  • q-fin.PR
  • 91G20, 60G40

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