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arXiv · 1504.03644

Pathwise super-replication via Vovk's outer measure

Mathias Beiglböck·Alexander M. G. Cox·Martin Huesmann·Nicolas Perkowski·David J. Prömel
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Abstract

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.

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Mathias Beiglböck, Alexander M. G. Cox, Martin Huesmann, Nicolas Perkowski, David J. Prömel. 2015-04-14. Pathwise super-replication via Vovk's outer measure. https://arxiv.org/abs/1504.03644

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