TY - JOUR
T1 - Pathwise superreplication via Vovk's outer measure
AU - Beiglboeck, Mathias
AU - Cox, Alexander M. G.
AU - Huesmann, Martin
AU - Perkowski, Nicolas
AU - Prömel, David J.
PY - 2017/10/1
Y1 - 2017/10/1
N2 - Since Hobson's seminal paper [D. Hobson: Robust hedging of the lookback option. In: Finance Stoch. (1998)] the connection between model-independent pricing and the Skorokhod embedding problem has been a driving force in robust finance. We establish a general pricing-hedging duality for financial derivatives which are susceptible to the Skorokhod approach. Using Vovk's approach to mathematical finance we derive a model-independent super-replication theorem in continuous time, given information on finitely many marginals. Our result covers a broad range of exotic derivatives, including lookback options, discretely monitored Asian options, and options on realized variance.
AB - Since Hobson's seminal paper [D. Hobson: Robust hedging of the lookback option. In: Finance Stoch. (1998)] the connection between model-independent pricing and the Skorokhod embedding problem has been a driving force in robust finance. We establish a general pricing-hedging duality for financial derivatives which are susceptible to the Skorokhod approach. Using Vovk's approach to mathematical finance we derive a model-independent super-replication theorem in continuous time, given information on finitely many marginals. Our result covers a broad range of exotic derivatives, including lookback options, discretely monitored Asian options, and options on realized variance.
KW - q-fin.MF
KW - math.PR
KW - q-fin.PR
KW - Primary: 60G44, 91G20, 91B24, Secondary: 60G42
UR - https://doi.org/10.1007/s00780-017-0338-2
UR - http://dx.doi.org/10.13140/RG.2.1.2209.7449
U2 - 10.1007/s00780-017-0338-2
DO - 10.1007/s00780-017-0338-2
M3 - Article
SN - 0949-2984
VL - 21
SP - 1141
EP - 1166
JO - Finance and Stochastics
JF - Finance and Stochastics
IS - 4
ER -