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Mathematical Finance and Probability Seminars

Robust Pricing and Hedging around the Globe

Tuesday, November 14, 2017 at 11:40am - 12:45pm

We consider the Robust Pricing Problem for a class of options encompassing American, Asian, Bermudan and European Options in a martingale optimal transport setting for càdlàg processes. We prove strong duality of the pricing and hedging problem and the existence of an optimal pathwise hedge. Our approach provides insight into the structure of primal and dual optimizers and provides a remarkable parity of the price bounds in this setting. For finitely supported marginal laws we are able to reduce the problem to a semi-infinite linear program and in the case of piecewise linear payoffs (risk reversal, butterfly spread, etc.) a finite linear program, making it very amenable to numerical optimization methods.
Location   Hill 705

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HillCenter

Mathematical Finance Master's Program

Department of Mathematics, Hill 348
Hill Center for Mathematical Sciences
Rutgers, The State University of New Jersey
110 Frelinghuysen Road
Piscataway, NJ 08854-8019

Email: finmath (at) rci.rutgers.edu
Phone: +1.848.445.3920
Fax: +1.732.445.5530