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Beiglböck, M., Cox, A. M. G., Huesmann, M., Perkowski, N., & Prömel, D. J. (2017). Pathwise Super-Hedging via Vovk’s Outer Measure. Finance and Stochastics, 21(4), 1141–1166. https://doi.org/10.1007/s00780-017-0338-2
Statistics and Probability; Statistics, Probability and Uncertainty; Finance; Model-independent pricing Optimal transport Skorokhod embedding Superreplication theorem Vovk´s outer measure / Mathematics Subject Classification (2010) 60G44 91G20 91B24 JEL Classification G13
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Abstract:
Since Hobson's seminal paper (Hobson in Finance Stoch. 2:329-347, 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 superreplication 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.
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Research Areas:
Mathematical Methods in Economics: 50% Fundamental Mathematics Research: 50%
