Super-replication on illiquid markets—semistatic approach

Volume 122 / 2020

Agnieszka Rygiel Banach Center Publications 122 (2020), 207-218 MSC: Primary 91G20; Secondary 91B26, 91B70. DOI: 10.4064/bc122-12

Abstract

We investigate the pricing-hedging duality for path dependent European options under model uncertainty in discrete time. The super-replicating portfolio consists of a dynamically traded illiquid risky stock and a static position in vanilla options which can be exercised at maturity. We provide the minimal super-replication price as the supremum of penalized expectations of the payoff over all probability measures which are consistent with observed market prices.

Authors

  • Agnieszka RygielDepartment of Mathematics
    Cracow University of Economics
    Rakowicka 27
    31-510 Cracow, Poland
    e-mail

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