Duality for robust hedging with proportional transaction costs of path dependent European options is obtained in a …. The main theorem is duality between hedging and a Monge-Kantorovich type optimization problem. In this dual transport … problem the optimization is over all the probability measures which satisfy an approximate martingale condition related to …

There are two major streams of literature on the modeling of financial bubbles: the strict local martingale framework … can exhibit strict local martingale behavior, we clarify the connection between these previously disconnected approaches …. While the original JLS model is never a strict local martingale, there are relaxations which can be strict local martingales …

allows us to rewrite the hedging portfolio explicitly in terms of the Malliavin derivative of the discounted payoff. We … illustrate this new result with two applications. Firstly, we obtain a closed-form expression for the hedging portfolio of a …

and one stock, to a market with a finite number n>1 of stocks. -- Portfolio theory ; transaction costs ; Harris recurrence … ; renewal theory …

The problem studied is the pricing of options on the CBOE Skew index. The option pricing theory developed seeks to … this hedge. The theory is applied to pricing VIX options using the market for SPY options and pricing options on JPM using …

In frictionless markets, the absence of arbitrage opportunities is equivalent to the existence of a martingale process … as the martingale measure in the frictionless case. This is a martingale evolving in the solvency cone. The solvency cone …. The existence of such processes is assumed in the formulation of super–hedging prices characterization of European and …