Super-replication in fully incomplete markets

Yan Dolinsky; Ariel Neufeld

doi:10.1111/mafi.12149

Super-replication in fully incomplete markets

Yan Dolinsky^*, Ariel Neufeld

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

11 Citations (Scopus)

Abstract

In this work, we introduce the notion of fully incomplete markets. We prove that for these markets, the super-replication price coincides with the model-free super-replication price. Namely, the knowledge of the model does not reduce the super-replication price. We provide two families of fully incomplete models: stochastic volatility models and rough volatility models. Moreover, we give several computational examples. Our approach is purely probabilistic.

Original language	English
Pages (from-to)	483-515
Number of pages	33
Journal	Mathematical Finance
Volume	28
Issue number	2
DOIs	https://doi.org/10.1111/mafi.12149
Publication status	Published - Apr 2018
Externally published	Yes

Bibliographical note

Publisher Copyright:
© 2017 Wiley Periodicals, Inc.

ASJC Scopus Subject Areas

Accounting
Finance
Social Sciences (miscellaneous)
Economics and Econometrics
Applied Mathematics

Keywords

martingale measures
stochastic volatility
super-replication

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10.1111/mafi.12149

Cite this

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AB - In this work, we introduce the notion of fully incomplete markets. We prove that for these markets, the super-replication price coincides with the model-free super-replication price. Namely, the knowledge of the model does not reduce the super-replication price. We provide two families of fully incomplete models: stochastic volatility models and rough volatility models. Moreover, we give several computational examples. Our approach is purely probabilistic.

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Super-replication in fully incomplete markets

Abstract

Bibliographical note

ASJC Scopus Subject Areas

Keywords

Access to Document

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