A stochastic control approach to No-Arbitrage bounds given marginals, with an application to Lookback options
We consider the problem of superhedging under volatility uncertainty for an investor allowed to dynamically trade the underlying asset, and statically trade European call options for all possible strikes with some given maturity. This problem is classically approached by means of the Skorohod Embedding Problem (SEP). Instead, we provide a dual formulation which converts the superhedging problem into a continuous martingale optimal transportation problem. We then show that this formulation allows to recover previously known results about Lookback options. In particular, our methodology induces a new presentation of the Azema-Yor solution of the SEP.
Year of publication: |
2013
|
---|---|
Authors: | Galichon, Alfred ; Henri-Labordère, Pierre ; Touzi, Nizar |
Institutions: | Sciences économiques, Sciences Po |
Saved in:
freely available
Saved in favorites
Similar items by person
-
Henri-Labordère, Pierre, (2013)
-
Le véritable enjeu de la Règle d'Or
Galichon, Alfred, (2011)
-
Marchés efficents ou marchés efficaces
Tibi, Philippe, (2010)
- More ...