Abstract
We show that when the price process S represents a fully incomplete market, the optimal super-replication of any Markovian claim g(ST) with g(â..) being nonnegative and lower semicontinuous is of buy-and-hold type. Since both (unbounded) stochastic volatility models and rough volatility models are examples of fully incomplete markets, one can interpret the buy-and-hold property when super-replicating Markovian claims as a natural phenomenon in incomplete markets.
| Original language | English |
|---|---|
| Article number | 1850051 |
| Journal | International Journal of Theoretical and Applied Finance |
| Volume | 21 |
| Issue number | 8 |
| DOIs | |
| Publication status | Published - Dec 1 2018 |
| Externally published | Yes |
Bibliographical note
Publisher Copyright:© 2018 World Scientific Publishing Company.
ASJC Scopus Subject Areas
- Finance
- General Economics,Econometrics and Finance
Keywords
- fully incomplete markets
- robust pricing
- rough volatility
- stochastic volatility
- Super-replication