Super-replication with proportional transaction cost under model uncertainty

Bruno Bouchard; Shuoqing Deng; Xiaolu Tan

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arXiv · 1707.09158

Super-replication with proportional transaction cost under model uncertainty

Bruno Bouchard·Shuoqing Deng·Xiaolu Tan

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Abstract

We consider a discrete time financial market with proportional transaction cost under model uncertainty, and study a super-replication problem. We recover the duality results that are well known in the classical dominated context. Our key argument consists in using a randomization technique together with the minimax theorem to convert the initial problem to a frictionless problem set on an enlarged space. This allows us to appeal to the techniques and results of Bouchard and Nutz (2015) to obtain the duality result.

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Bruno Bouchard, Shuoqing Deng, Xiaolu Tan. 2017-07-28. Super-replication with proportional transaction cost under model uncertainty. https://arxiv.org/abs/1707.09158

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